Hawaii Federal District Court Applies Rules of Evidence: BONY/Mellon, US Bank, JP Morgan Chase Failed to Prove Sale of Note

This quiet title claim against U.S. Bank and BONY (collectively, “Defendants”) is based on the assertion that Defendants have no interest in the Plaintiffs’ mortgage loan, yet have nonetheless sought to foreclose on the subject property.

Currently before the court is Defendants’ Motion for Summary Judgment, arguing that Plaintiffs’ quiet title claim fails because there is no genuine issue of material fact that Plaintiffs’ loan was sold into a public security managed by BONY, and Plaintiffs cannot tender the loan proceeds. Based on the following, the court finds that because Defendants have not established that the mortgage loans were sold into a public security involving Defendants, the court DENIES Defendants’ Motion for Summary Judgment.

Editor’s Note: We will be commenting on this case for the rest of the week in addition to bringing you other news. Suffice it to say that the Court corroborates the essential premises of this blog, to wit:

1. Quiet title claims should not be dismissed. They should be heard and decided based upon the facts admitted into evidence.
2. Presumptions are not to be used in lieu of evidence where the opposing party has denied the underlying facts and the conclusion expressed in the presumption. In other words, a presumption cannot be used to lead to a result that is contrary to the facts.
3. Being a “holder” is a a conclusion of law created by certain presumptions. It is not a plain statement of ultimate facts. If a party wishes to assert holder or holder in due course status they must plead and prove the facts supporting that legal conclusion.
4. A sale of the note does not occur without proof under simple contract doctrine. There must be an offer, acceptance and consideration. Without the consideration there is no sale and any presumption arising out of the allegation that a party is a holder or that the loan was sold fails on its face.
5. Self serving letters announcing authority to represent investors are insufficient in establishing a foundation for testimony or other proof that the actor was indeed authorized. A competent witness must provide the factual testimony to provide a foundation for introduction of a binding legal document showing authority and even then the opposing party may challenge the execution or creation of such instruments.
6. [Tactical conclusion: opposing motion for summary judgment should be filed with an affidavit alleging the necessary facts when the pretender lender files its motion for summary judgment. If the pretender's affidavit is struck down and/or their motion for summary judgment is denied, they have probably created a procedural void where the Judge has no choice but to grant summary judgment to homeowner.]
7. “When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587.” See case below
8. “a plaintiff asserting a quiet title claim must establish his superior title by showing the strength of his title as opposed to merely attacking the title of the defendant.” {Tactical: by admitting the note, mortgage. debt and default, and then attacking the title chain of the foreclosing party you have NOT established the elements for quiet title. THAT is why we have been pounding on the strategy that makes sense: DENY and DISCOVER: Lawyers take note. Just because you think you know what is going on doesn’t mean you do. Advice given under the presumption that the debt is genuine when that is in fact a mistake of the homeowner which you are compounding with your advice. Why assume the debt, note , mortgage and default are genuine when you really don’t know? Why would you admit that?}
9. It is both wise and necessary to deny the debt, note, mortgage, and default as to the party attempting to foreclose. Don’t try to prove your case in your pleading. Each additional “explanatory” allegation paints you into a corner. Pleading requires a short plain statement of ultimate facts upon which relief could be legally granted.
10. A denial of signature on a document that is indisputably signed will be considered frivolous. [However an allegation that the document is not an original and/or that the signature was procured by fraud or mistake is not frivolous. Coupled with allegation that the named lender did not loan the money at all and that in fact the homeowner never received any money from the lender named on the note, you establish that the deal was sign the note and we'll give you money. You signed the note, but they didn't give you the money. Therefore those documents may not be used against you. ]

MELVIN KEAKAKU AMINA and DONNA MAE AMINA, Husband and Wife, Plaintiffs,
v.
THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK; U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR J.P. MORGAN MORTGAGE ACQUISITION TRUST 2006-WMC2, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-WMC2 Defendants.
Civil No. 11-00714 JMS/BMK.

United States District Court, D. Hawaii.
ORDER DENYING DEFENDANTS THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR J.P. MORGAN MORTGAGE ACQUISITION TRUST 2006-WMC2, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-WMC2′S MOTION FOR SUMMARY JUDGMENT
J. MICHAEL SEABRIGHT, District Judge.
I. INTRODUCTION

This is Plaintiffs Melvin Keakaku Amina and Donna Mae Amina’s (“Plaintiffs”) second action filed in this court concerning a mortgage transaction and alleged subsequent threatened foreclosure of real property located at 2304 Metcalf Street #2, Honolulu, Hawaii 96822 (the “subject property”). Late in Plaintiffs’ first action, Amina et al. v. WMC Mortgage Corp. et al., Civ. No. 10-00165 JMS-KSC (“Plaintiffs’ First Action”), Plaintiffs sought to substitute The Bank of New York Mellon, FKA the Bank of New York (“BONY”) on the basis that one of the defendants’ counsel asserted that BONY owned the mortgage loans. After the court denied Plaintiffs’ motion to substitute, Plaintiffs brought this action alleging a single claim to quiet title against BONY. Plaintiffs have since filed a Verified Second Amended Complaint (“SAC”), adding as a Defendant U.S. Bank National Association, as Trustee for J.P. Morgan Mortgage Acquisition Trust 2006-WMC2, Asset Backed Pass-through Certificates, Series 2006-WMC2 (“U.S. Bank”). This quiet title claim against U.S. Bank and BONY (collectively, “Defendants”) is based on the assertion that Defendants have no interest in the Plaintiffs’ mortgage loan, yet have nonetheless sought to foreclose on the subject property.

Currently before the court is Defendants’ Motion for Summary Judgment, arguing that Plaintiffs’ quiet title claim fails because there is no genuine issue of material fact that Plaintiffs’ loan was sold into a public security managed by BONY, and Plaintiffs cannot tender the loan proceeds. Based on the following, the court finds that because Defendants have not established that the mortgage loans were sold into a public security involving Defendants, the court DENIES Defendants’ Motion for Summary Judgment.

II. BACKGROUND

A. Factual Background
Plaintiffs own the subject property. See Doc. No. 60, SAC ¶ 17. On February 24, 2006, Plaintiffs obtained two mortgage loans from WMC Mortgage Corp. (“WMC”) — one for $880,000, and another for $220,000, both secured by the subject property.See Doc. Nos. 68-6-68-8, Defs.’ Exs. E-G.^[1]

In Plaintiffs’ First Action, it was undisputed that WMC no longer held the mortgage loans. Defendants assert that the mortgage loans were sold into a public security managed by BONY, and that Chase is the servicer of the loan and is authorized by the security to handle any concerns on BONY’s behalf. See Doc. No. 68, Defs.’ Concise Statement of Facts (“CSF”) ¶ 7. Defendants further assert that the Pooling and Service Agreement (“PSA”) dated June 1, 2006 (of which Plaintiffs’ mortgage loan is allegedly a part) grants Chase the authority to institute foreclosure proceedings. Id. ¶ 8.

In a February 3, 2010 letter, Chase informed Plaintiffs that they are in default on their mortgage and that failure to cure default will result in Chase commencing foreclosure proceedings. Doc. No. 68-13, Defs.’ Ex. L. Plaintiffs also received a March 2, 2011 letter from Chase stating that the mortgage loan “was sold to a public security managed by [BONY] and may include a number of investors. As the servicer of your loan, Chase is authorized by the security to handle any related concerns on their behalf.” Doc. No. 68-11, Defs.’ Ex. J.

On October 19, 2012, Derek Wong of RCO Hawaii, L.L.L.C., attorney for U.S. Bank, submitted a proof of claim in case number 12-00079 in the U.S. Bankruptcy Court, District of Hawaii, involving Melvin Amina. Doc. No. 68-14, Defs.’ Ex. M.

Plaintiffs stopped making payments on the mortgage loans in late 2008 or 2009, have not paid off the loans, and cannot tender all of the amounts due under the mortgage loans. See Doc. No. 68-5, Defs.’ Ex. D at 48, 49, 55-60; Doc. No. 68-6, Defs.’ Ex. E at 29-32.

>B. Procedural Background
>Plaintiffs filed this action against BONY on November 28, 2011, filed their First Amended Complaint on June 5, 2012, and filed their SAC adding U.S. Bank as a Defendant on October 19, 2012.

On December 13, 2012, Defendants filed their Motion for Summary Judgment. Plaintiffs filed an Opposition on February 28, 2013, and Defendants filed a Reply on March 4, 2013. A hearing was held on March 4, 2013.
At the March 4, 2013 hearing, the court raised the fact that Defendants failed to present any evidence establishing ownership of the mortgage loan. Upon Defendants’ request, the court granted Defendants additional time to file a supplemental brief.^[2] On April 1, 2013, Defendants filed their supplemental brief, stating that they were unable to gather evidence establishing ownership of the mortgage loan within the time allotted. Doc. No. 93.

III. STANDARD OF REVIEW

Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The burden initially lies with the moving party to show that there is no genuine issue of material fact. See Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323). If the moving party carries its burden, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forwards with specific facts showing that there is a genuine issue for trial.“ Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal quotation signals omitted).

An issue is `genuine’ only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is `material’ only if it could affect the outcome of the suit under the governing law.” In re Barboza,545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587.

IV. DISCUSSION

As the court previously explained in its August 9, 2012 Order Denying BONY’s Motion to Dismiss Verified Amended Complaint, see Amina v. Bank of New York Mellon,2012 WL 3283513 (D. Haw. Aug. 9, 2012), a plaintiff asserting a quiet title claim must establish his superior title by showing the strength of his title as opposed to merely attacking the title of the defendant. This axiom applies in the numerous cases in which this court has dismissed quiet title claims that are based on allegations that a mortgagee cannot foreclose where it has not established that it holds the note, or because securitization of the mortgage loan was defective. In such cases, this court has held that to maintain a quiet title claim against a mortgagee, a borrower must establish his superior title by alleging an ability to tender the loan proceeds.^[3]

This action differs from these other quiet title actions brought by mortgagors seeking to stave off foreclosure by the mortgagee. As alleged in Plaintiffs’ pleadings, this is not a case where Plaintiffs assert that Defendants’ mortgagee status is invalid (for example, because the mortgage loan was securitized, Defendants do not hold the note, or MERS lacked authority to assign the mortgage loans). See id. at *5. Rather, Plaintiffs assert that Defendants are not mortgagees whatsoever and that there is no record evidence of any assignment of the mortgage loan to Defendants.^[4] See Doc. No. 58, SAC ¶¶ 1-4, 6, 13-1 — 13-3.

In support of their Motion for Summary Judgment, Defendants assert that Plaintiffs’ mortgage loan was sold into a public security which is managed by BONY and which U.S. Bank is the trustee. To establish this fact, Defendants cite to the March 2, 2011 letter from Chase to Plaintiffs asserting that “[y]our loan was sold to a public security managed by The Bank of New York and may include a number of investors. As the servicer of your loan, Chase is authorized to handle any related concerns on their behalf.” See Doc. No. 68-11, Defs.’ Ex. J. Defendants also present the PSA naming U.S. Bank as trustee. See Doc. No. 68-12, Defs.’ Ex. J. Contrary to Defendants’ argument, the letter does not establish that Plaintiffs’ mortgage loan was sold into a public security, much less a public security managed by BONY and for which U.S. Bank is the trustee. Nor does the PSA establish that it governs Plaintiffs’ mortgage loans. As a result, Defendants have failed to carry their initial burden on summary judgment of showing that there is no genuine issue of material fact that Defendants may foreclose on the subject property. Indeed, Defendants admit as much in their Supplemental Brief — they concede that they were unable to present evidence that Defendants have an interest in the mortgage loans by the supplemental briefing deadline. See Doc. No. 93.

Defendants also argue that Plaintiffs’ claim fails as to BONY because BONY never claimed an interest in the subject property on its own behalf. Rather, the March 2, 2011 letter provides that BONY is only managing the security. See Doc. No. 67-1, Defs.’ Mot. at 21. At this time, the court rejects this argument — the March 2, 2011 letter does not identify who owns the public security into which the mortgage loan was allegedly sold, and BONY is the only entity identified as responsible for the public security. As a result, Plaintiffs’ quiet title claim against BONY is not unsubstantiated.

V. CONCLUSION

Based on the above, the court DENIES Defendants’ Motion for Summary Judgment.

IT IS SO ORDERED.

[1] In their Opposition, Plaintiffs object to Defendants’ exhibits on the basis that the sponsoring declarant lacks and/or fails to establish the basis of personal knowledge of the exhibits. See Doc. No. 80, Pls.’ Opp’n at 3-4. Because Defendants have failed to carry their burden on summary judgment regardless of the admissibility of their exhibits, the court need not resolve these objections.

Plaintiffs also apparently dispute whether they signed the mortgage loans. See Doc. No. 80, Pls.’ Opp’n at 7-8. This objection appears to be wholly frivolous — Plaintiffs have previously admitted that they took out the mortgage loans. The court need not, however, engage Plaintiffs’ new assertions to determine the Motion for Summary Judgment.

[2] On March 22, 2013, Plaintiffs filed an “Objection to [87] Order Allowing Defendants to File Supplemental Brief for their Motion for Summary Judgment.” Doc. No. 90. In light of Defendants’ Supplemental Brief stating that they were unable to provide evidence at this time and this Order, the court DEEMS MOOT this Objection.

[3] See, e.g., Fed Nat’l Mortg. Ass’n v. Kamakau, 2012 WL 622169, at *9 (D. Haw. Feb. 23, 2012);Lindsey v. Meridias Cap., Inc., 2012 WL 488282, at *9 (D. Haw. Feb. 14, 2012); Menashe v. Bank of N.Y., ___ F. Supp. 2d ___, 2012 WL 397437, at *19 (D. Haw. Feb. 6, 2012); Teaupa v. U.S. Nat’l Bank N.A., 836 F. Supp. 2d 1083, 1103 (D. Haw. 2011); Abubo v. Bank of N.Y. Mellon, 2011 WL 6011787, at *5 (D. Haw. Nov. 30, 2011); Long v. Deutsche Bank Nat’l Tr. Co., 2011 WL 5079586, at *11 (D. Haw. Oct. 24, 2011).

[4] Although the SAC also includes some allegations asserting that the mortgage loan could not be part of the PSA given its closing date, Doc. No. 60, SAC ¶ 13-4, and that MERS could not legally assign the mortgage loans, id. ¶ 13-9, the overall thrust of Plaintiffs’ claims appears to be that Defendants are not the mortgagees (as opposed to that Defendants’ mortgagee status is defective). Indeed, Plaintiffs agreed with the court’s characterization of their claim that they are asserting that Defendants “have no more interest in this mortgage than some guy off the street does.” See Doc. No. 88, Tr. at 9-10. Because Defendants fail to establish a basis for their right to foreclose, the court does not address the viability of Plaintiffs’ claims if and when Defendants establish mortgagee status.

Quiet Title Claims Explained

see also http://livinglies.wordpress.com/2013/04/29/hawaii-federal-district-court-applies-rules-of-evidence-bonymellon-us-bank-jp-morgan-chase-failed-to-prove-sale-of-note/

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis: If you are thinking that with all the publicity surrounding the obvious fatal defects in the millions of foreclosures already completed, quiet title should be unnecessary, you are probably right. The fact is that the real world is more complicated and as Elizabeth Warren and several dozen bloggers and journalists have pointed out the average of $300 per homeowner being paid to settle the matter is not just inadequate it is stupid. No amount of money will actually cure the current title corruption on record in all 50 states due to practice of allowing complete strangers to the transaction to self-anoint themselves as creditors, foreclose on property and submit a credit bid at auction when they were not owed any money and there was no credit relationship between the homeowner and the bidder.

Quiet Title is an effective tool but it is not a silver bullet. It is about what is contained in the county records. If someone accidentally (or on purpose) records a lien against your property and they refuse to retract it, then you are forced to file an action with the Court that says I own the property and my title is clouded by documents that were recorded as liens against my title.

Those liens are not lawful, and they should be declared null and void or at a minimum the court should issue a declaratory statement based upon facts of the case that sets forth the stakeholders in the property and the nature of their claim.

In order to claim the latter, you would need to state that while the lien is unlawful, the party named on the lien, or the party claiming to hold the right to the lien, refuses to cooperate with clearing title or to explain the nature of their claim. Thus the homeowner is left with a lien which is unlawful and a claimant who insists that it is lawful. The homeowner is in doubt as to his rights and therefore asks the Court to quiet title or declare the rights of the parties.

In filing quiet title claims the mistake most often made is that it is being used defensively instead of offensively. The complaint that fails merely attacks the right of some pretender lender to foreclose. That is not a quiet title action. That is a denial of the debt, note, mortgage, default, notice etc.

And the Courts regularly and correctly dismiss such claims as quiet title claims. You can’t quiet tile because someone does not have a right to foreclose. You can only quiet title if you can assert and prove to the Court that the items on record do not apply to you or  your property and therefore should be removed.

AND you can’t get through a motion to dismiss a declaratory action if you don’t state that you are in doubt and give cogent reasons why you are in doubt. If you state that the other side has no right to do anything and end it there, you are using quiet title defensively rather than offensively in a declaratory action.

Stating that the pretender lender has no right to foreclose is not grounds for a declaratory action either. If you make a short plain statement of FACTS (not conclusions of law) upon which the relief sought could be granted you survive a motion to dismiss. If you only state the conclusions of law, you lose the motion to dismiss.

In such a declaratory action you must state that you have doubts because the pretender lender has taken the position and issued statements, letters or demands indicating they are the owner of the lien but you have evidence from expert analyses from title and securitization experts that they are not the owner of the line and they never were.

Remember in securitized transactions you would need to name the original named payee on the note and the secured party(ies) and state that they never should have recorded the lien because they did not perform as required by the agreement (i.e., they didn’t loan you money) and/or because they received loss mitigation payments in excess of the amount due. If you want to get more elaborate, you can say that they now claim to have nothing to do with the loan and refuse to apply loss mitigation payments to the loan even though they were received.

The problem in Florida is that such claims may be interpreted by the Clerk as claims relating to land and title which requires the ungodly amount of $1900 in filing fees alone, which I personally think is an unconscionable and unconstitutional denial of access to the court to all except people with a lot of money.

So you might want to go with slander of title seeking money damages or failure to refund over-payments received from sale or mitigation payments relating to your loan. That COULD be the basis of a claim in which the property is already sold at auction, short-sale, or resale. If the pretender lender received the payoff or the property illegally and then fraudulently executed a satisfaction of mortgage even though they were never the lender nor the purchaser of the loan, then you, as the owner of the property are probably entitled to that money plus interest and probably attorney fees.

PRACTICE NOTE: Strategically it seems like it is tough going if you attack the title under correct but unpalatable causes of action (i.e. actions that the judicial system already has decided they don’t like the outcome — a free house to the homeowner). So the other way of skinning the cat is to file actions for damages and that I think is the future of mortgage litigation. The basic action is simple breach of contract (the agreement to enter into the loan transaction and/or the note).

Filing suit for damages AFTER the sale gives you playing field without moving goal posts and allows fairly simple straightforward causes of action which many attorneys will soon realize they can take strictly on contingency or mostly on contingency. The net result may well be either the tender of money and/or the tender of the property back to the homeowner or former homeowner in lieu of payment for damages.It also opens the door to the possibility of punitive, treble, or exemplary damages or some combination of those.

At my firm we are looking hard at closings where the pretender lender took the money and ran on a short-sale or resale. It is clear-cut. They either had a right to the money or they didn’t. IF they didn’t have the right to execute the satisfaction of mortgage or if they fraudulently diverted the money to their own benefit in lieu of the creditor from whom they did receive authority, then you still have a right to refund of the money that unjustly enriched the pretender lender.  The money goes to the former owner/seller and to nobody else. If there is a claimant that wishes to step forward to attack the award, then we will deal with it, but based upon my information such claims will not be made.

More News:

Error Claims Cast Doubt on Bank of America Foreclosures in Bay Area
http://www.nbcbayarea.com/investigations/series/mortgage-mess/Error-Claims-Cast-Doubt-on-Bank-of-America-Foreclosures-in-Bay-Area-204764581.html

Number of homes entering foreclosure plunges in California
http://www.latimes.com/business/la-fi-foreclosure-report-20130424,0,6017958.story

Politics: While Wronged Homeowners Got $300 Apiece in Foreclosure Settlement, Consultants Who Helped Protect Banks Got $2 Billion
http://m.rollingstone.com/?seenSplash=1&redirurl=/politics/blogs/taibblog/while-wronged-homeowners-got-300-apiece-in-foreclosure-settlement-consultants-who-helped-protect-banks-got-2-billion-20130426

Minnesota Supreme Court Affirms That Foreclosing Parties Must Record Mortgage Assignments Prior To Initiating Foreclosure By Advertisement
http://www.jdsupra.com/legalnews/minnesota-supreme-court-affirms-that-for-50369/

Presenting: The Housing Bubble 2.0
http://www.zerohedge.com/news/2013-04-29/presenting-housing-bubble-20

 

Local Government and HOAs Settling Budget Crisis: Suing Banks for Priority of Liens

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

CHAMPERTY AND MAINTENANCE ARISE AS WE PREDICTED HERE YEARS AGO.

Editor’s Analysis: For those of you who have followed this blog for years, it will come as no surprise that local governments are suing the Banks for back taxes, failure to pay recording fees through the private recording system as MERS et al, and that Homeowner, Condominium and Cooperative Associations have figured out that their lien might have priority over the mortgages that are recorded, but not perfected. The good news is that this pits institution against institution, where the idea of a “free house” for borrowers doesn’t poison the waters and the Judges really must rule on evidence instead of proffers of evidence that are outright lies.

In Arizona alone the potential collection of  back and unpaid taxes, fees, costs, penalties etc. comes to more than $3 Billion — that is their figure not mine. I estimated it as closer to $10 billion. The legislature wanted to move forward in enabling the AG to collect thees fees which would have completely reversed their budget from deficit to surplus.

At one time I was representing several hundred condominium and cooperative associations. I enforced their liens with foreclosure so I’m no stranger to being on the other side of this. The liens were valid because there was a declaration recorded that was specifically referred to in the deed and title insurance. The issue was did the homeowner pay or not pay. Any contest based upon mismanagement of the association was bifurcated or dismissed to be heard another day in another courtroom.

I am told that there are numerous “businesses” that are popping up buying the HOA lien and the filing to foreclose — with considerable success, because THEY unlike the homeowners are attacking the instruments of record as imperfect liens, attacking the note and supposed assignments as no evidence of any real transaction and demanding discovery and proof of payment.

So we now have hundreds of lawsuits filed by State, County and City governments for fees and transactions that were neither real nor recorded. In Florida now where I am licensed we are taking on associations as clients — but only for the actions to quiet title, nullification of the mortgage instrument and other claims related to securitization. For those HOAs where the issue is non-payment, we are happy to take them on as clients but there is no reason to switch attorneys. But usually beyond the issue of non-payment is whether the deed on foreclosure for the now abandoned property (in whole or in part) is the priority of the lien. Once the forecloser’s claim loses priority, it will established that the mortgages were not real and the debt is not secured. Quiet title does not extinguish the debt but it sure does clear out invalid lienholders who cannot prove their claim with proof of payment for the origination or purchase of the loan.

Hence the action by the HOA invalidates the foreclosure and possibly the debt as well. That is as it should be since the underwriting banks showed one set of a documents to the investor/lenders and another set of documents to the homeowner/borrower. There was no meeting of the minds. In both cases the fake documents falsified the use of funds and title creating a shell game that is still corrupting our title systems across the country.

Thus the action by the HOA, properly done, allows the homeowner to stay and pay their maintenance fees and special assessments without worrying about a mortgage foreclosure from a party claiming to be the creditor. Worst case scenario is that the supposed forecloser steps into the shoes of a lienholder that is junior to the HOA and other liens as of the date of judgment on the quiet title action. Of course if the bank cougohs up the money then there is no action for the HOA to take. The Banks know that everything stated here is true, so in most cases, except for truly abandoned property, the Bank is going to pay the lien, the attorneys fees and court costs.

This is why so many people are starting businesses that buy up the liens and then foreclose on the banks. The deal they make with the HOA is usually at some sort of discount, whereas the Bank will get little or no discount from the business that took over the lien. There is a risk here of the issue of Champerty and Maintenance on both sides of litigation here. If the HOA sues directly and at their own expense, they are not susceptible to claims of Champerty and maintenance. But the agreement to transfer the lien to a stranger to the transaction gives rise to those claims especially if there is a sharing of the outcome.

This is why I wrote a long time ago several article on Champerty and maintenance. These nominees are commencing foreclosure proceedings on behalf of unidentified people who money is at risk and the banks and other entities that are doing this are funding the litigation and expenses of foreclosure, regardless of whether it is in a judicial or non-judicial state. If there is sharing of the proceeds in one form or another then it is most likely Champerty and maintenance. A simple cause of action alleging a short plain statement of ultimate facts upon which relief could be granted is enough to get passed a motion to dismiss and it is highly likely to get into discovery given the nature of the cause of action. Seeing the actual trail of money, who paid whom, how and when will essentially eviscerate the forecloser’s “mortgage”,  Note”, assignment and “substitution of “trustee.”

It is classic Champerty and Maintenance that if the principal to whom the money is owed by the borrower has decided NOT to pursue the claim that an interloper will be almost automatically be branded as a party whose interest results strictly from Champerty and maintenance. It is a very old doctrine but I have canvassed several states and it is still very much on the books and still used.

Cancellation of Void Instrument

Consider this an add-on to the workbook entitled Whose Lien is It Anyway also known as Volume II Workbook from Garfield Continuum Seminars.

Several Attorneys, especially from California are experimenting with a cause of action in which an instrument is cancelled — because it throws the burden of proof onto the any party claiming the validity or authenticity of the instrument.

I have been researching and analyzing this, and I think they are onto something but I would caution that your pleadings must adopt the deny and discover strategy and that you must be prepared to appeal. There is also a resurgence of tacit procuration doctrines, in which the receiver of communication has a definite duty to respond.

Here is Part I of the analysis: There will be at least one more installment:

Cancellation of Void Instrument

In most cases loans that are later subject to claims of securitization (assignment) are equally subject to cancellation. There are potential defenses to the motion or pleading demanding cancellation of the instrument; but if framed properly, the motion or pleading could be utilized as an advanced discovery tool leading to a final order. This is particularly true if a RESPA 6 (Qualified Written Request) precedes the motion or pleading.

Cancellation of a void instrument is most often directed at a Mortgage or Deed of Trust that is recorded. The elements of cancellation of an instrument include that the document is void (not just the recording). That means that what you are saying is that there is nobody in existence with any legal right, justification or excuse to attempt to use or enforce the document.

I believe that it requires the pleader to allege that the parties on the instrument are unknown to the Pleader in that there never was a financial transaction between the pleader and the the other parties mentioned and accordingly the recording of the document is at best a mistake and at worst, fraud. The element of fraud usually is involved whether you plead it or not.  However the same principles and elements might well apply to the following:

Substitution of Trustee
Notice of Default
Notice of Sale
Deed recorded as a result of foreclosure auction
Judgment for Eviction or Unlawful Detainer
Mortgage Bond
Unrecorded instruments like promissory notes, pooling and servicing agreements, and mortgage bonds, credit default swaps etc.

Another word of caution: an existing document carries a certain amount of the appearance of authenticity and validity. That appearance may rise to an informal presumption by a Judge who believes he understands the “facts” of the case. The informal presumption might be elevated by state or federal statute that may describe the presumption as rebutable, or presumed to be rebuttable. In some cases, the rebutable presumption could be elevated to an irrebutable presumption, which might mean that nobody is permitted to challenge the validity or authenticity of the document. But even irrefutable presumptions are subject to challenge if they are procured by deceit or fraud in the inducement, or fraud in the execution.

The scenario assumed here is that no loan receivable was legally created because there was no financial transaction between the homeowner and whoever is on the note, mortgage or whatever document you are seeking to cancel. Where appropriate, the pleader can allege that they deny ever having signed the instrument to that it was signed with expectation that the parties designated as lender, beneficiary or payee never completed the transaction by funding.

It is probably fair to say that presumptions are only successfully challenged if the allegations involve fraud or at least breach of presumed facts or promises. A note is evidence of an obligation and is presumed to validly recite the terms of repayment of a legitimate debt. But it also possible that the note might be evidence of the amount of the obligation, but not its terms of repayment if the facts and circumstances show that the offer was unclear or the acceptance was unclear. In the case of so-called securitized loans, accepting the allegations made by foreclosers, the offer of the loan contained terms that were never communicated to the borrower. This is because an instrument containing the terms of repayment was at material variance with the terms recited in the note. The instrument received by the lender was a mortgage bond. And most importantly the lender and the borrower were never in direct communication with one another.

The interesting effect of the substitution of the mortgage bond for a loan receivable is that the mortgage bond is NOT signed by the homeowner and is no payments of principal and interest are due to the investor except from the REMIC issuing entity that never received any enforceable documents from the homeowner.

Nor were the terms for repayment ever disclosed to the homeowner. And the compensation of the intermediaries was not disclosed as required under TILA. This constellation of factors throws doubt, at the very least, as to whether the closing was ever completed even without the the funding. The fact that the funding never took place from the designated payee or “lender” more or less seals the deal.

You must have at the ready your clear argument that if the “trust” was the lender or any of its investors then the note should have said so and there would be no argument about funding, or whether the note or mortgage were valid instruments. But Wall Street had other plans for “ownership” of the loan and substituted a series a naked nominees or straw-men for their own financial benefit and contrary to the terms expressed to the investor (pension fund) and the homeowner (borrower).

Wire Transfer instructions to the closing agents tell another story. They do not show any indication that the transfer to the closing agent was for the benefit of the designated lender, whose name was simply borrowed by Wall Street banks in order to trade the “loans” as if they were real and as if the banks owned the bonds instead of the trusts or the investors. This could only have been accomplished by NOT having the investors money travel through the REMIC trust. Hence the moment of origination of the obligation took place when the homeowner received the money from the investors through accounts that were maintained by the banks not for the REMICS but for the investors. This means that investors who believe their rights emanate from the origination documents of the trust are mistaken because of the false statements by the banks when they sold the bogus mortgage bonds.

If that is the case, their is no perfected lien, because the only mortgage or deed of trust recorded shows that it is to protect the payee “lender” (actually a naked nominee) in the vent the borrower fails to make payments and otherwise comply with the terms of the note and mortgage. But the note and mortgage relate to an unfunded transaction in which at not time was any party in the alleged securitization chain the source of funds for origination, and at not time was there ever “value received” for any assignments, bogus or otherwise, robo-signed or otherwise.

It also means that the investors must be disclosed and that for the first time the homeowners and pension funds who actually were involved in the transaction, can compare notes and decide on the balance of the obligation, if any, and what to do about it. Allowing the banks to foreclose as servicer, trustee of an asset-backed trust, or in any other capacity is unsupported by the evidence. The homeowner, as in any mortgage foreclosure, is entitled to examine the loan receivable account from the item of origination through the present. If there is agreement, then the possibility of a HAMP or other modification or settlement is possible.

Allowing the servicers to intermediate between the investors and the homeowners is letting the fox into the hen-house. If any deal is struck, then all the money they received for credit de fault swaps and insurance might be due back to the payors, since the mortgages declared in default are actually still performing loans AND at present are not secured by any perfected lien.

Cancellation of the note does not cancel the obligation. In most cases it converts the obligation from one that provided for periodic payments to a demand loan. Success of the borrower could be dangerous and lead the borrower to adopt portions of the note as evidence of the terms of repayment while challenging other parts of the recitals of the note. Cancellation of the note would also eviscerate the promise of collateral which is a separate agreement that offers the home as collateral to secure the faithful performance  of the terms of the note. Hence the mortgage or deed of trust would be collaterally canceled merely by canceling the note.

If the note is cancelled, the action can move on to cancel the mortgage instrument. In the context of securitized loans it seems unlikely that there could be any success without attacking both the mortgage, as security, and the note, as evidence of an obligation. In its simplest form, the attack would have the highest chance of success by successfully attacking the obligation. If a lender obtains a note from a borrower and then fails to fund the loan, no obligation arises. It follows logically that the recitals of the note would then be meaningless as would the recitals in the mortgage. Having achieved the goal of proving the instrument as invalid or meaningless, the presence of the instrument in the county recorder’s office would naturally cause damage to other stakeholders and should be cancelled.

If the mortgage is in fact cancelled, then the next logical step might be a quiet title action that would have the court declare the rights and obligations of the stakeholders, thus eliminating any further claims based upon off-record transactions or the absence of actions presumed to be completed as stated in the instrument itself.

It must be emphasized that this is not a collateral attack or a flank attack on the obligation based upon theories of securitization, the pooling and servicing agreement or the prospectus. cancellation of an instrument can only be successful if the party who would seek to use the instrument under attack cannot substantiate that the instrument is supported by the facts.

The facts examined usually include the issues of offer, acceptance and consideration at the time of origination of the instrument under attack. A later breach will most likely not be accepted as reasons for cancellation unless the later event is payment of a debt. Failure to return the cancelled note would be a proper subject of cancellation if the allegation was made that the the obligation was completely satisfied. The presence of the original note after such payment and refusal or inability to return the note as cancelled is reason enough for the court to enter an order canceling the note. Any attempt to sell the note or assign it would be ineffective as against the maker of the note and could subject the assignor to both civil and criminal penalties.

Both payment and origination issues arise in connection with the creation of loan documents. The originator (and any successors) must be able to establish offer, acceptance and consideration. The signature element missing from most of the document chains subjecting all deeds of trusts, notes, mortgages and assignments to cancellation is the lack of consideration.

In a money transaction, consideration means money. If money was not tendered by the originator of the documents despite the requirements to do so as set forth in the documents, the putative borrower or debtor who executed the documents is entitled to cancellation.
In the case of securitized loans, the appearance of propriety is created by reams of documents that cover up the origination documents, giving the appearance that numerous parties agreed that the proper elements were present at the time of the origination of the loan. This has successfully been used by banks to create the informal presumption that the essential elements were present at origination — offer, acceptance and consideration.

The originator (or its successors) can easily avoid cancellation by simply establishing the identity of itself as the lender, the signature of the borrower, and the proof of a cashed check, wire transfer or ACH confirmation showing the payment by the originator to the borrower. In loans subject to claims of securitization and multiple assignments, they cannot do this because the original transaction was never completed.

The issue in securitized loans is that while wire transfer instructions exist and might even mention the borrower by name and could even make reference to the originator, the instructions always include directions on where to send the surplus funds, if any exist. Those funds are clearly not to be given or sent to the originator but rather back to the undisclosed lender, which makes the transaction a table funded loan defined as illegal predatory practices under the Federal Truth in Lending Act.

If the documents named the actual lender, then the offer, acceptance and consideration could be shown as being present. Originators may not “borrow” consideration from a deal between the borrower and another party and use it to establish the consideration for the closing loan documents with the originator. That would create two obligations — the one evidenced by the note and the other evidenced by the mortgage bond, that asserts ownership of the obligation.

Borrowers and creditors are restricted by one simple fact. For every dollar of principal borrowed there must be a dollar paid on that obligation. Putting aside the issue of interest on the loan, the creditor is entitled only to one dollar for each dollar loaned, and the borrower is only required to make a payment on an obligation that is due. The obligation becomes due the moment the borrower accepts the money or the benefits of the money, regardless of whether any documents are drafted or executed. The converse is also true — the creation, and even execution of documents does not create the obligation. It is only the actual money transaction that creates the obligation.

Stripping away all other issues and documentation at the time of origination of the loan, it can fairly assumed that in most of the subject cases of “securitization” that the originator was either not a depository institution or was not acting under its charter as a depository or lending institution. If it was not a lending institution, then it loaned money to the borrower out of its borrowed or retained capital — with the source of funds coming from their own bank account. Based upon a review of hundreds of wire transfer instructions, none of the non-lending institutions was the source of funds, yet their name was used specifically recited in the note as “lender.” The accompanying disclosure documents and settlement statement describes the “lender” as being the named originator. Hence, without funds, no consideration was present. If there was an absence of consideration for the documents that were putatively executed, then the documents are worthless.

The originator in the above scenario lacked two capacities: (1) it could not enforce the note or mortgage because it lacked a loan receivable account that would suffer financial damage and (2) it could not legally execute a satisfaction, cancellation or release of the obligation or the putative lien.  Such an originator at the moment of closing is therefore missing the necessary elements to survive a request to cancel the instrument at that time or any other time. No assignments, allonges, indorsements, or even delivery of the loan documents can improve the survival of the loan documents originated, even if some assignee up the chain paid for it.

Yet at the same time that there was no consideration from the originator, there was a loan received by the borrower. If it didn’t come from the originator, and the money actually arrived, the question is properly asked to identify the source of funds and whether that party had the capacity to enforce collection of the loan and could execute a release or satisfaction or cancellation of the note and mortgage. Here is where the hairs split. The source of funds is owed the money regardless of whether there was a note or mortgage or settlement documents or disclosures — simply because they do have a loan receivable that would be damaged by non-payment. But that loan receivable is not supported by any documentation that one would ordinarily find in a mortgage loan.

The creation of documents reciting a false transaction, “borrowing” the fact that the homeowner did receive funds from another source, does NOT create a second obligation. Hence the note, mortgage (Deed of trust) and obligation presumed in favor of the named originator must be cancelled.

Since the sources of funds are neither the owner of the loan, the payee on the note, the lender identified on the note, mortgage and settlement documents, they lack the power to enforce any of those documents and secondly, lack the power to cancel, release or satisfy a note or mortgage on which they are not the payee or secured party. Hence the fact that the borrower received funds gives rise to a demand obligation against the borrower to repay the loan. All the funding source needs is evidence of the payment from their bank account and the receipt by the borrower.

CA Trial Court Upholds Claims for Improper Assignment, Accounting, Unfair Practices

Editor’s Note: In an extremely well-written and well reasoned decision Federal District Court Judge M. James Lorenz denied the Motion to dismiss of US Bank on an alleged WAMU securitization that for the first time recognizes that the securitization scheme could be a sham, with no basis in fact.

Although the Plaintiff chose not to make allegations regarding false origination of loan documents, which I think is important, the rest of the decision breaks the illusion created by the banks and servicers through the use of documents that look good but do not meet the standards of proof required in a foreclosure.

1. I would suggest that lawyers look at the claim and allegations that the origination documents were false and were procured by fraud.
2. Since no such allegation was made, the court naturally assumed the loan was validly portrayed in the loan documents and that the note was evidence of the loan transaction, presuming that SBMC actually loaned the money to the Plaintiff, which does not appear to be the case.
3. This Judge actually read everything and obvious questions in his mind led him to conclude that there were irregularities in the assignment process that could lead to a verdict in favor of the Plaintiff for quiet title, accounting, unfair practices and other claims.
4. The court recites the fact that the loan was sold to “currently unknown entity or entities.” This implicitly raises the question of whether the loan was in fact actually sold more than once, and if so, to whom, for how much, and raises the issues of whom Plaintiff was to direct her payments and whether the actual creditor was receiving the money that Plaintiff paid.  — a point hammered on, among others, at the Garfield Seminars coming up in Emeryville (San Francisco), 8/25 and Anaheim, 8/29-30. If you really want to understand what went on in the mortgage meltdown and the tactics and strategies that are getting traction in the courts, you are invited to attend. Anaheim has a 1/2 day seminar for homeowners. Call customer service 520-405-1688 to attend.
   
5. For the first time, this Court uses the words (attempt to securitize” a loan as opposed to assuming it was done just based upon the paperwork and the presence of the the parties claiming rights through the assignments and securitization.
6. AFTER the Notice of Sale was recorded, the Plaintiff sent a RESPA 6 Qualified Written request. The defendants used the time-honored defense that this was not a real QWR, but eh court disagreed, stating that the Plaintiff not only requested information but gave her reasons in some details for thinking that something might be wrong.
7. Plaintiff did not specifically mention that the information requested should come from BOTH the subservicer claiming rights to service the loan and the Master Servicer claiming rights to administer the payments from all parties and the disbursements to those investor lenders that had contributed the money that was used to fund the loan. I would suggest that attorneys be aware of this distinction inasmuch as the subservicer only has a small snapshot of transactions solely between the borrower and the subservicer whereas the the information from the Master Servicer would require a complete set of records on all financial transactions and all documents relating to their claims regarding the loan.
8. The court carefully applied the law on Motions to Dismiss instead of inserting the opinion of the Judge as to whether the Plaintiff would win stating that “material allegations, even if doubtful in fact, are assumed to be true,” which is another point we have been pounding on since 2007. The court went on to say that it was obligated to accept any claim that was “plausible on its face.”
9. The primary claim of Plaintiffs was that the Defendants were “not her true creditors and as such have no legal, equitable, or pecuniary right in this debt obligation in the loan,’ which we presume to mean that the court was recognizing the distinction, for the first time, between the legal obligation to pay and the loan documents.
10. Plaintiff contended that there was not a proper assignment to anyone because the assignment took place after the cutoff date in 2006 (assignment in 2010) and that the person executing the documents, was not a duly constituted authorized signor. The Judge’s decision weighed more heavily that allegation that the assignment was not properly made according to the “trust Document,” thus taking Defendants word for it that a trust was created and existing at the time of the assignment, but also saying in effect that they can’t pick up one end of the stick without picking up the other. The assignment, after the Notice of Default, violated the terms of the trust document thus removing the authority of the trustee or the trust to accept it, which as any reasonable person would know, they wouldn’t want to accept — having been sold on the idea that they were buying performing loans. More on this can be read in “whose Lien Is It Anyway?, which I just published and is available on www.livinglies-store.com
11. The Court states without any caveats that the failure to assign the loan in the manner and timing set forth in the “trust document” (presumably the Pooling and Servicing Agreement) that the note and Deed of trust are not part of the trust and that therefore the trustee had no basis for asserting ownership, much less the right to enforce.
12. THEN this Judge uses simple logic and applies existing law: if the assignment was void, then the notices of default, sale, substitution of trustee and any foreclosure would have been totally void.
13. I would add that lawyers should consider the allegation that none of the transfers were supported by any financial transaction or other consideration because consideration passed at origination from the investors directly tot he borrower, due to the defendants ignoring the provisions of the prospectus and PSA shown to the investor-lender. In discovery what you want is the identity of each entity that ever showed this loan is a loan receivable on any regular business or record or set of accounting forms. It might surprise you that NOBODY has the loan posted as loan receivable and as such, the argument can be made that NOBODY can submit a CREDIT BID at auction even if the auction was otherwise a valid auction.
14. Next, the Court disagrees with the Defendants that they are not debt collectors and upholds the Plaintiff’s claim for violation of FDCPA. Since she explicitly alleges that US bank is a debt collector, and started collection efforts on 2010, the allegation that the one-year statute of limitation should be applied was rejected by the court. Thus Plaintiff’s claims for violations under FDCPA were upheld.
15. Plaintiff also added a count under California’s Unfair Competition Law (UCL) which prohibits any unlawful, unfair or fraudulent business act or practice. Section 17200 of Cal. Bus. & Prof. Code. The Court rejected defendants’ arguments that FDCPA did not apply since “Plaintiff alleges that Defendants violated the UCL by collecting payments that they lacked the right to collect, and engaging in unlawful business practices by violating the FDCPA and RESPA.” And under the rules regarding motions to dismiss, her allegations must be taken as absolutely true unless the allegations are clearly frivolous or speculative on their face.
16. Plaintiff alleged that the Defendants had created a cloud upon her title affecting her in numerous ways including her credit score, ability to refinance etc. Defendants countered that the allegation regarding a cloud on title was speculative. The Judge said this is not speculation, it is fact if other allegations are true regarding the false recording of unauthorized documents based upon an illegal or void assignment.
17. And lastly, but very importantly, the Court recognizes for the first time, the right of a homeowner to demand an accounting if they can establish facts in their allegations that raise questions regarding the status of the loan, whether she was paying the right people and whether the true creditors were being paid. “Plaintiff alleges facts that allows the Court to draw a reasonable inference that Defendants may be liable for various misconduct alleged. See Iqbal, 129 S. Ct. at 1949.

Here are some significant quotes from the case. Naranjo v SBMC TILA- Accounting -Unfair practices- QWR- m/dismiss –

Judge Lorenzo Decision in Naranjo vs. SBMC Mortgage et al 7-24-12

No allegations regarding false origination of loan documents:

SBMC sold her loan to a currently unknown entity or entities. (FAC ¶ 15.) Plaintiff alleges that these unknown entities and Defendants were involved in an attempt to securitize the loan into the WAMU Mortgage Pass-through Certificates WMALT Series 2006-AR4 Trust (“WAMU Trust”). (Id. ¶ 17.) However, these entities involved in the attempted securitization of the loan “failed to adhere to the requirements of the Trust Agreement

In August 2009, Plaintiff was hospitalized, resulting in unforeseen financial hardship. (FAC ¶ 25.) As a result, she defaulted on her loan. (See id. ¶ 26.)
On May 26, 2010, Defendants recorded an Assignment of Deed of Trust, which states that MERS assigned and transferred to U.S. Bank as trustee for the WAMU Trust under the DOT. (RJN Ex. B.) Colleen Irby executed the Assignment as Officer for MERS. (Id.) On the same day, Defendants also recorded a Substitution of Trustee, which states that the U.S. Bank as trustee, by JP Morgan, as attorney-in-fact substituted its rights under the DOT to the California Reconveyance Company (“CRC”). (RJN Ex. C.) Colleen Irby also executed the Substitution as Officer of “U.S. Bank, National Association as trustee for the WAMU Trust.” (Id.) And again, on the same day, CRC, as trustee, recorded a Notice of Default and Election to Sell. (RJN Ex. D.)
A Notice of Trustee’s sale was recorded, stating that the estimated unpaid balance on the note was $989,468.00 on July 1, 2011. (RJN Ex. E.)
On August 8, 2011, Plaintiff sent JPMorgan a Qualified Written Request (“QWR”) letter in an effort to verify and validate her debt. (FAC ¶ 35 & Ex. C.) In the letter, she requested that JPMorgan provide, among other things, a true and correct copy of the original note and a complete life of the loan transactional history. (Id.) Although JPMorgan acknowledged the QWR within five days of receipt, Plaintiff alleges that it “failed to provide a substantive response.” (Id. ¶ 35.) Specifically, even though the QWR contained the borrow’s name, loan number, and property address, Plaintiff alleges that “JPMorgan’s substantive response concerned the same borrower, but instead supplied information regarding an entirely different loan and property.” (Id.)

The court must dismiss a cause of action for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all allegations of material fact as true and construe them in light most favorable to the nonmoving party. Cedars-Sanai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the court need not “necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotation marks omitted). In fact, the court does not need to accept any legal conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S. Ct. 1937, 1949 (2009)

the allegations in the complaint “must be enough to raise a right to relief above the speculative level.” Id. Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a `probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

Plaintiff’s primary contention here is that Defendants “are not her true creditors and as such have no legal, equitable, or pecuniary right in this debt obligation” in the loan. (Pl.’s Opp’n 1:5-11.) She contends that her promissory note and DOT were never properly assigned to the WAMU Trust because the entities involved in the attempted transfer failed to adhere to the requirements set forth in the Trust Agreement and thus the note and DOT are not a part of the trust res. (FAC ¶¶ 17, 20.) Defendants moves to dismiss the FAC in its entirety with prejudice.

The vital allegation in this case is the assignment of the loan into the WAMU Trust was not completed by May 30, 2006 as required by the Trust Agreement. This allegation gives rise to a plausible inference that the subsequent assignment, substitution, and notice of default and election to sell may also be improper. Defendants wholly fail to address that issue. (See Defs.’ Mot. 3:16-6:2; Defs.’ Reply 2:13-4:4.) This reason alone is sufficient to deny Defendants’ motion with respect to this issue. [plus the fact that no financial transaction occurred]

Moving on, Defendants’ reliance on Gomes is misguided. In Gomes, the California Court of Appeal held that a plaintiff does not have a right to bring an action to determine a nominee’s authorization to proceed with a nonjudicial foreclosure on behalf of a noteholder. 192 Cal. App. 4th at 1155. The nominee in Gomes was MERS. Id. at 1151. Here, Plaintiff is not seeking such a determination. The role of the nominee is not central to this action as it was in Gomes. Rather, Plaintiff alleges that the transfer of rights to the WAMU Trust is improper, thus Defendants consequently lack the legal right to either collect on the debt or enforce the underlying security interest.

Plaintiff requests that the Court “make a finding and issue appropriate orders stating that none of the named Defendants . . . have any right or interest in Plaintiff’s Note, Deed of Trust, or the Property which authorizes them . . . to collect Plaintiff’s mortgage payments or enforce the terms of the Note or Deed of Trust in any manner whatsoever.” (FAC ¶ 50.) Defendant simplifies this as a request for “a determination of the ownership of [the] Note and Deed of Trust,” which they argue is “addressed in her other causes of action.” (Defs.’ Mot. 6:16-20.) The Court disagrees with Defendants. As discussed above and below, there is an actual controversy that is not superfluous. Therefore, the Court DENIES Defendants’ motion as to Plaintiff’s claim for declaratory relief.

Defendants argue that they are not “debt collectors” within the meaning of the FDCPA. (Defs.’ Mot. 9:13-15.) That argument is predicated on the presumption that all of the legal rights attached to the loan were properly assigned. Plaintiff responds that Defendants are debt collectors because U.S. Bank’s principal purpose is to collect debt and it also attempted to collect payments. (Pl.’s Opp’n 19:23-27.) She explicitly alleges in the FAC that U.S. Bank has attempted to collect her debt obligation and that U.S. Bank is a debt collector. Consequently, Plaintiff sufficiently alleges a claim under the FDCPA.
Defendants also argue that the FDCPA claim is time barred. (Defs.’ Mot. 7:18-27.) A FDCPA claim must be brought “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). Defendants contend that the violation occurred when the allegedly false assignment occurred on May 26, 2010. (Defs.’ Mot. 7:22-27.) However, Plaintiff alleges that U.S. Bank violated the FDCPA when it attempted to enforce Plaintiff’s debt obligation and collect mortgage payments when it allegedly had no legal authority to do so. (FAC ¶ 72.) Defendants wholly overlook those allegations in the FAC. Thus, Defendants fail to show that Plaintiff’s FDCPA claim is time barred.
Accordingly, the Court DENIES Defendants’ motion as to Plaintiff’s FDCPA claim.
Defendants argue that Plaintiff’s letter does not constitute a QWR because it requests a list of unsupported demands rather than specific particular errors or omissions in the account along with an explanation from the borrower why she believes an error exists. (Defs.’ Mot. 10:4-13.) However, the letter explains that it “concerns sales and transfers of mortgage servicing rights; deceptive and fraudulent servicing practices to enhance balance sheets; deceptive, abusive, and fraudulent accounting tricks and practices that may have also negatively affected any credit rating, mortgage account and/or the debt or payments that [Plaintiff] may be obligated to.” (FAC Ex. C.) The letter goes on to put JPMorgan on notice of
potential abuses of J.P. Morgan Chase or previous servicing companies or previous servicing companies [that] could have deceptively, wrongfully, unlawfully, and/or illegally: Increased the amounts of monthly payments; Increased the principal balance Ms. Naranjo owes; Increased the escrow payments; Increased the amounts applied and attributed toward interest on this account; Decreased the proper amounts applied and attributed toward the principal on this account; and/or[] Assessed, charged and/or collected fees, expenses and miscellaneous charges Ms. Naranjo is not legally obligated to pay under this mortgage, note and/or deed of trust.
(Id.) Based on the substance of letter, the Court cannot find as a matter of law that the letter is not a QWR.
California’s Unfair Competition Law (“UCL”) prohibits “any unlawful, unfair or fraudulent business act or practice. . . .” Cal. Bus. & Prof. Code § 17200. This cause of action is generally derivative of some other illegal conduct or fraud committed by a defendant. Khoury v. Maly’s of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993). Plaintiff alleges that Defendants violated the UCL by collecting payments that they lacked the right to collect, and engaging in unlawful business practices by violating the FDCPA and RESPA.

Defendants argue that Plaintiff’s allegation regarding a cloud on her title does not constitute an allegation of loss of money or property, and even if Plaintiff were to lose her property, she cannot show it was a result of Defendants’ actions. (Defs.’ Mot. 12:22-13:4.) The Court disagrees. As discussed above, Plaintiff alleges damages resulting from Defendants’ collection of payments that they purportedly did not have the legal right to collect. These injuries are monetary, but also may result in the loss of Plaintiff’s property. Furthermore, these injuries are causally connected to Defendants’ conduct. Thus, Plaintiff has standing to pursue a UCL claim against Defendants.

Plaintiff alleges that Defendants owe a fiduciary duty in their capacities as creditor and mortgage servicer. (FAC ¶ 125.) She pursues this claim on the grounds that Defendants collected payments from her that they had no right to do. Defendants argue that various documents recorded in the Official Records of San Diego County from May 2010 show that Plaintiff fails to allege facts sufficient to state a claim for accounting. (Defs.’ Mot. 16:1-3.) Defendants are mistaken. As discussed above, a fundamental issue in this action is whether Defendants’ rights were properly assigned in accordance with the Trust Agreement in 2006. Plaintiff alleges facts that allows the Court to draw a reasonable inference that Defendants may be liable for various misconduct alleged. See Iqbal, 129 S. Ct. at 1949.

National Notary Association Takes Up Robosigning

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Editor’s Comment: 

National Notary Association to take Up Issue of  Forgery, Robosigning and attesting to authority in corporate capacity.  Arizona’s Ken Bennett, Secretary of State, is among the officials leading the charge on this issue.

Notary Trade Group: Foreclosure Fraud Crisis Highlights Need For Legal, Trusted, Ethical Notarizations

Posted: 21 Apr 2012 09:07 PM PDT

The National Notary Association recently announced:

§ With the foreclosure ‘robo-signing’ crisis and the National Mortgage Settlement sending shockwaves through America’s mortgage industry, three nationally prominent Secretaries of State will convene a special Keynote Panel at the National Notary Association’s 34th Annual Conference this June to discuss the growing demand for trusted, legal notarizations, and what Notaries need to do to increase public protections and reduce liability risks.

§ Secretaries of State Elaine Marshall of North Carolina, Beth Chapman of Alabama, and Ken Bennett of Arizona are at the forefront of developments transforming the role of Notaries Public. Their insights will be a highlight of Conference 2012 — especially in light of mounting nationwide concerns over notarial compliance and risk management.

§ “We are pleased that these three influential Secretaries — all of whom are among the top minds in notarial issues — will join us to address the nation’s Notaries and their employers during this critical time,” said NNA President and Chief Executive Officer Thomas A. Heymann.

§ “The foreclosure crisis put the spotlight squarely on the high value of legal and ethical notarizations. These Secretaries will provide their perspectives on what needs to be done to strengthen the notarial process and avoid these types of financial crises.”

For more, see Secretaries of State to Address Notary Compliance, Liability, Consumer Protection Following National Mortgage Settlement(Distinguished State Leaders Will Convene Keynote Panel at the National Notary Association’s 2012 Conference in San Diego).

Don’t leave or enter short sale home without quiet title and adequate title insurance.

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U.S. home short sales surpass foreclosure deals for first time

Editor’s Comment: 

Well of course short sales will be higher than REO sales. REO sales of foreclosed property where the bank or its agent owns the property presents a virtually impossible situation with respect to title. The odds are rising every day that a homeowner is going to sue, reverse the eviction, reverse the foreclosure, get title free of the mortgage and note and have the right to exclusive possession. We are getting reports of this across the country. While the banks are trying to keep a stiff upper lip about it all they are in a state of panic (!) because of the loss of ill-gotten gains they thought they had in the bag and (2) because this loss must now be written down on their balance sheet which means that their capital reserves must be correspondingly increased. Where will they get the money?

 SO REO sales are going to be increasingly problematic.

But in a short sale it is the actual homeowner who signs the deed. That eliminates a wild card that is totally out of the control of the banks. The balance of the problem is that the satisfaction of the old mortgage is being executed by parties who have no ownership of the loan nor any agency authority to represent the true creditors (in most cases). But if the short-sale goes thorugh the new buyer can file a quiet title action for a few hundred dollars in fees and a couple of hundred dollars in court costs, and get a judge to sign off on all title claims. To paraphrase American Express’ “don’t leave home without it” It is the best interest of both the old homeowner who could be subject to liability a second time if the real creditor wakes up and in the interest of the new buyer who doesn’t want to lose his home to the claims of some creditor who can actually prove a case. So don’t leave or enter a short-sale home with quiet title — and a REAL title insurance policy that does not exclude claims arising from supposed securitization of the loan.

U.S. home short sales surpass foreclosure deals for first time                                        New Mexico Business Weekly

In a sign that banks are becoming more willing to sell houses for less than the amount that is owed on them, the number of U.S. home short sales surpassed foreclosure deals for the first time, Bloomberg reports, citing Lender Processing Services Inc.

Short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

The three largest banks in New Mexico are Wells Fargo, Bank of America and U.S. Bancorp    , respectively.

Foreclosure Strategists: Meeting in Phx: Learn about QWRs

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Editor’s Comment: 

Contact: Darrell Blomberg  Darrell@ForeclosureStrategists.com  602-686-7355

Meeting: Tuesday, April 24, 2012, 7pm to 9pm

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Requests

The goal of this meeting is to build an effective set of requests that operate within the law get us real answers from our loan servicers.

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.

Many people are blindly sending bloated letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  We will focus on drafting a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Payoff Request Letters.

**** PLEASE SEND ME ANY QUALIFIED WRITTEN REQUESTS (or 10-day assignee or payoff demand requests) THAT YOU HAVE ACCESS TO.  I WILL USE THESE AS A BASIS FOR THIS MEETING. ****

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed at www.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

AZ Secretary of State Ken Bennett Guest Speaker at Phoenix Foreclosure Strategists Meeting

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Foreclosure Strategists:  Phoenix Arizona

Contact: Darrell Blomberg 602-686-7355 or Darrell@ForeclosureStrategists.com

Meeting: Tuesday, April 17, 2012

Special guest speaker:  Arizona Secretary of State Ken Bennett

Some of the topics we will be discussing are:
Duties of the Secretary of the State
Oath’s of Office
Missing pages
Complaint Process
Notaries Public
Training & Commissioning
Can the public attend?
Administration of Oath
Duties
Notarized versus Acknowledged
Electronic Notarizations
Complaint Process
Who can file
Missing dates: “My Commission Expires: ____”
Procedural process
Interaction with Attorney General’s Office
Suspensions
Revocation of notary commission
Reinstatements
Informal Settlement Conferences
Paula Gruntmeir’s three retroactive reinstatements
Validity of Documents not properly acknowledged
Interaction with Legislative Process
Current efforts
Interaction with Attorney General’s Office
Have you written a guitar parody about Arizona Foreclosures?
Comments on Foreclosure effects on fellow Arizonans
Things we can expect from your office
Things we can do to support your efforts
Thank you!

IF YOU HAVE ANY ADDITIONAL TOPICS TO ADD TO THIS OUTLINE PLEASE GET THOSE TO ME NOW!

To further prepare for this meeting you may want to familiarize yourself with:

            Arizona Secretary of State’s website
            (http://www.azsos.gov)
            Annual Report of the Arizona Secretary of State
            (http://www.azsos.gov/public_services/annual_report/2011/Annual_Report.pdf) 

Tuesday, April 24, 2012

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Letters

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.  Many people are blindly sending letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  Learn to draft a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Accounting Request Letters.  More details for this meeting will follow.

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed atwww.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

LPS: So We Fabricated and Forged Documents… So what? Here’s what!!

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IT’S ALL ABOUT THE MONEY, STUPID!

Editor’s Analysis: This is the moment I have been waiting for. After years of saying the documents were real, they admit, in the face of a mountain of irrefutable evidence, that the documents were not real, but that as a convenience they should still be allowed to use them. Besides the obvious criminality and slander of tile and all sorts of other things that are attendant to these practices, there is a certain internal logic to their assertion and you should not dismiss it without thinking about it. Otherwise you will be left with your jaw hanging open wondering how an admitted criminal gets to keep the spoils of illegal activities.

I have been pounding on this subject for weeks because I could see in the motions being filed by banks and servicers that they had changed course and were now pursuing a new strategy that plays on the simple logic that you took a loan, you signed a note, you didn’t make the payments as stated in the note — everything else is window dressing and for the various parties in securitization to sort amongst themselves.

All foreclosure actions are actually, when they boil them down, just collection actions. It is about money owed. So far, the arguments that have worked have been those occasions where the conduct of the Bank has been so egregious that the Judge wasn’t going to let them have the money or the house even if they stood on their heads.

But to coordinate an attack on these foreclosures, you need to defeat the presumption that the collection effort is simple, that the homeowner didn’t pay a debt that was due, and that the arguments concerning the forged, fabricated, fraudulent documents are paperwork issues that can be taken up with law enforcement or civil suits between the various undefined participants in the non-existent securitization chain.

Now we have LPS admitting false assignments. The question that must be both asked and answered by you because you have enough data and expert opinions to raise the material fact that there was a reason why the false paperwork was fabricated and forged and it wasn’t because of volume. Start with the fact that they didn’t have any problem getting the paperwork signed they wanted in the more than 100 million mortgage transactions “closed” during this mortgage meltdown period. Volume doesn’t explain it.

Your first assertion should be payment and waiver because the creditor who loaned the money got paid and waived any remainder. You use the Securitization and title report from a credible expert who can back up what you are saying. That gets you past the motions to dismiss and into discovery, where these cases are won.

Your assertion should be that the paperwork was fabricated because there was no transaction to support the contents of any of the assignments. And from that you launch the basic attack on the loan closing itself. First, following the above line of reasoning, they used the same tactics to create false paperwork at closing that identified neither the lender (contrary to the requirements of TILA and state lending statutes), nor ALL of the terms of the transaction, as contained in the prospectus and PSA given to investors.

But let us be clear. There are only two ways you can get out of a debt: (1) payment and (2) waiver. There isn’t any other way so stop imagining that some forgery in the documents is going to give you the house. It won’t. But if you can show payment or waiver or both, then you have a material issue of fact that completely or at least partially depletes the presumption of the Judge that you simply don’t want to pay a legitimate debt from a loan you now regret.

Why are the terms of the securitization documentation important?

1. Because it was the investor who came up with the money and it was the borrower who took it. The money transaction was between the investors and the homeowners, with everyone else an intermediary or conduit.
2. It is ONLY the securitization documents that provide power or authority for the servicer or trustee to act as servicer or trustee of the mortgage backed security pool.
3. If the deal was between the investor who put up the money and the homeowner who took it, where are the documents between the investor and the homeowner? They can only exist if we connect the closing documents with the homeowner with the closing documents with the investor. 
4. But if the transfer or assignment documents were defective, faulty, forged and fabricated, as well as fraudulent attempts to transfer bad loans into pools that investors said they would only accept good loans, then the there is nothing in the REMIC, there is no trust, there is no trustee of the pool and the servicer has authority to service nothing. 
5. That breaks the connection between the so-called closing documents with the homeowner and the so-called closing documents with the investor. No connection means no nexus. No nexus means the investors have a claim arising from the fact that they loaned money but they don’t get the benefit of a secured loan and they especially don’t get anything unless THEY make the claim.
6. If the investors choose not to make the claim for collection or foreclosure, there is nothing anywhere in any law that allows an interloper to insert himself into the process and say that if the investor doesn’t want it, I’ll take it.
7. Your position should address the reality: appraisal fraud, deceptive lending practices, violations of TILA all contributed to the acceptance of a faulty loan product. But that isn’t why your client doesn’t owe the money. Your client does owe the money, but it has been paid to the creditor and the balance has been waived in the insurance and credit default swap contracts as well as the the Federal bailouts.
   
8. The source of funding has been paid in whole or in part, they received the monthly payments even while they declared a default against your client homeowner, and they waived any right to pursue the rest from homeowners because they wish to avoid the exposure to defenses and affirmative defenses that the homeowner will  bring in the mortgage origination process.
9. The failure to identify the true creditor contrary to the requirements of law and the failure to describe in the note and mortgage the full terms of the loans creates a fatal defect when applied to THIS case on its facts, which you will be able to prove if you are allowed to proceed in discovery.
10. Allowing interlopers into the process to pretend as though they were the mortgage lenders or successors leaves the homeowner with nobody to sue for offset, and no defenses to raise against a party who had nothing to do with either the investor or the homeowner in the closing with the investor wherein mortgage bonds were purchased, and the closing with the homeowner in which a portion of the funds collected were used to fund a loan to the homeowner.

LPS Uses Bogus Florida IG Report on Firing of Foreclosure Fraud Investigators in Motion to Dismiss Nevada Lawsuit
By: David Dayen http://news.firedoglake.com/2012/01/31/lps-uses-bogus-florida-ig-report-on-firing-of-foreclosure-fraud-investigators-in-motion-to-dismiss-nevada-lawsuit/

We’re at T-minus four days for sign-ons to the foreclosure fraud settlement, and we know that Florida’s Pam Bondi is on board, despite pushback from advocates in her state, ground zero for the foreclosure crisis. There’s an interesting nugget buried in this article, though.

Bondi spokeswoman Jennifer Meale said in an email that their concerns are “misguided” because the settlement would provide a historic level of monetary relief and will overhaul the mortgage industry.

“Rather than engaging in political grandstanding, Attorney General Bondi is working hard to reach an agreement that gets Floridians substantial relief now and holds banks accountable for their misconduct,” Meale wrote.

The settlement is expected to provide $1,800 each for about 750,000 families across the country. It is a response to such practices as “robo-signing” by bank employees who often knew little or nothing about the mortgage documents they were hired to sign.

Nevada, New York, Delaware, New Hampshire and Massachusetts contend the deal isn’t strong enough because it would protect banks from future civil liability.

It will not, though, fully release them from future state criminal lawsuits.

Put aside Bondi’s dissembling for a second, and the idea that an $1,800 for the theft of your home represents “historic” relief. This lawyer in Utah called it what it is: “An arbitrary system of modifications administered by the same banks that knowingly perpetrated the fraud on the homeowner in the first place, and allowed to get off by paying $1800 for an illegal foreclosed home. That’s outrageous.”

But New Hampshire? That’s a new one. I know that Attorney General Michael Delaney has done some preliminary investigations of foreclosure practices in his state, and I know he was present at that meeting of 15 AGs looking for an alternative to the settlement. But Delaney has been pretty quiet overall. Since when is he listed among the holdouts?

That could just be bad information. And to be clear, liability isn’t the central issue anymore. But I don’t know how states like Massachusetts and Nevada, with active legislation against banks and document processors over the same conduct that would be released here, could possibly sign on to this deal.

There’s some news on that front. Lender Processing Services, which has been sued by Nevada for deceptive practices in generating false documents, sought to dismiss the complaint today in a filing with a state court.

The complaint by Nevada Attorney General Catherine Cortez Masto fails to allege any document executed by subsidiaries was incorrect or caused any borrower financial harm, Lender Processing Services said in a statement today.

The state’s claims “are a collection of suppositions, legal conclusions and inflammatory labels,” the company said in the court filing. The document couldn’t be immediately verified in court records [...]

Nevada sued the company in December, claiming that it engaged in a pattern of “falsifying, forging and/or fraudulently executing” foreclosure documents, requiring employees to execute or notarize as many as 4,000 foreclosure- related documents a day, according to a statement from the attorney general. Lender Processing Services also demanded kickbacks from foreclosure firms, the office said.

Two interesting things here. First, LPS leans hard on the idea that borrowers weren’t harmed by the use of false documents. The implication here is that the borrower was delinquent anyway, so there’s no abuse going on. But the more important part of the motion to dismiss (copy at the link) comes when LPS makes the claim that robo-signing isn’t really a crime. It’s merely “signing of documents by an authorized agent,” says LPS, and that is permitted under Nevada law. Here’s one way they justify that (DocX is a subsidiary of LPS):

The State of Florida has reached an identical conclusion regarding DocX’s surrogate signed documents. Two assistant attorneys general involved in that state’s investigation of the mortgage crisis, including DocX, prepared an information power point presentation in which surrogate signing was characterized as “forgery.” The two attorneys were subsequently terminated for alleged fraud, deficient and improper investigatory practices which triggered a formal review by the Inspector General of Florida. In a recently issued official report, the propriety of the termination of the attorneys was confirmed, and specifically, the power point characterization of surrogate signing as “forgery” was determined to be unsupported by the legal definition of forgery.

Wow. So LPS used the whitewash IG report from Florida to justify the dismissal of their lawsuit in Nevada. And remember, LPS lobbyists more recently urged the Florida AG’s office to intervene on their behalf in a criminal case in Michigan. The connections between the Florida AG’s office and LPS just continue to grow.

This also happens to be BS. Pam Bondi made a recent motion in a Florida appeals court, as part of a case against the foreclosure mill David J. Stern, which stated, among other things, this:

The Attorney General’s motion asks the Fourth DCA to certify that its decision in Stern passes upon the following question of great public importance: whether the creation of invalid assignments of mortgages by a law firm and subsequent use of such documents by the firm in foreclosure litigation on behalf of the purported assignee is an unfair and deceptive trade practice which may be the subject of an investigation by the Office of the Attorney General.

This is a tacit acknowledgement of illegal assignments, which is functionally the opposite of what the IG report said. So of course LPS uses the latter in their Nevada case.

It’s completely insidious. And if the foreclosure fraud settlement goes through, LPS will surely point to that as another reason why they should be held harmless for their illegal conduct.

Deutsch Bank Inquiry Reveals Insider Influence by Paulson

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Editor’s Comment: At the end of the day, everyone knows everything. The billions that Paulson made are directly attributable to his ability to instruct Deutsch and others as to what should be put into the Credit Default Swaps and other hedge products that comprised his portfolio. He did this because they let him — and then he traded on what he not only knew, he was trading on what he had done — all to the detriment of the investors who had purchased mortgage bonds and other exotic instruments.

The singular question that comes out of all this is what happened to the money? Judges are fond of saying that there was a loan, it wasn’t paid and the borrower is the one who didn’t pay it. Everything else is just window dressing that can be addressed through lawsuits amongst the securitization participants so why should a lowly Judge sitting in on a foreclosure case mess with any of that?

The reason is that the debt, contrary to the Judges assumption (with considerable encouragement from the banks and servicers) was never owed to the originator or the intermediaries who were conduits in the funding of the loan. The debt was owed to the investor-lender. And those who are attempting to foreclose are illegally inserting themselves into mortgage documentation in which they have no interest directly or indirectly.

If they are owed money, which many of them are not because they waived the right of recovery from the homeowner, it is through an action for restitution or unjust enrichment, not mortgage foreclosure. Banks and servicers are intentionally blurring the distinction between the actual creditor-lender and those other parties who were co-obligees on the mortgage bond in order to get the benefit of of foreclosure on a loan they did not fund or purchase.

So how does that figure in to what happened here. Paulson an outside to the transaction with investors and an outside to the investors in the bogus loan products sold to homeowners, arranges a bet that the mortgages were fail. He is essentially selling the loans short with delivery later after they fail and are worth pennies. But the Swap doesn’t require delivery, so he just gets the money. The fees he paid for the SWAP are buried into the income statement of Deutsch in this case. So it looks like a transaction like a horse-race where you place a bet — win or lose you don’t get the horse and you don’t have to feed him either.

But in order for this transaction to occur, the money received by Deutsch and the money paid to Paulson must be the subject of a detailed accounting. Without a COMBO Title and Securitization search and Loan Level Accounting, you won’t see the whole picture — you only see the picture that the servicer presents in foreclosure which is snapshot of only the borrower payments, not the payments and receipts relating to the mortgage loan, which as we all know were never owned by Deutsch or anyone else because the transfer papers were never executed, delivered or recorded without fabrication and forgery.

Paulson is an extreme case where claw-back of that money will be fought tooth and nail. But that money was ill-gotten gains arranged by Paulson based upon insider information, that directly injured the investor-lenders who were still buying this stuff and directly injured the borrowers who were never credited with the money that either was received by the investor creditors, or should have been received or credited tot hem because the money was received on their behalf.

Once you factor in the third party obligee payments as set forth in the PSA and Prospectus, you will find that we have a choice: either the banks get to keep the money they stole from investors and borrowers, or the money must be returned. If it must be returned, then a portion of that should go to reducing the debt, as per the requirements of the note, for payment received by the creditor, whether or not it was paid by the borrower.

BOTTOM LINE: Securitization never happened. And the money that was passed around like a whiskey bottle (see Mike Stuckey’s article in 2009) has never been subject to an accounting. Your job, counselor, is not to prove that all this true, but to prove that you have a reasonable belief that the debt has been paid in whole or in part to the creditor and that the default doesn’t exist. This creates the issue of fact that allows you to proceed the next stage of litigation, including discovery where most of these cases settle. They settle because the intermediaries who are bringing these actions are doing so without authority or even interest from the investor-creditors.

What is needed, is a direct path between investor creditors and homeowners debtors to settle up and compare notes. This is what the banks and servicers are terrified about. When the books are compared, everyone will know how much is missing, that the investors should be paid in full and that the therefore  the debt does not exist as set forth in the closing papers with the borrower. Watch this Blog for an announcement for a program that provides just such a path — where investors and borrowers can get together, compare notes, settle up, modify or mediate their claims, leaving the investors in MUCH better position and a content homeowner who no longer needs to fear that his world, already turned upside down, will get worse.

It may still be that the homeowner borrower has on obligation, but it isn’t to the creditor that loaned the money that funded the mortgage loan. Any such debt is with a third party obligee whose cause of action has been intentionally blurred so that the pretenders can pretend that they have rights under a mortgage or deed of trust in which they have no interest on a deal where they was no transfer or sale.

www.creditflux.com/Structured/2012-01-31/SEC-looks-into-Deutsche-Bank-CDO-shorted-by-Paulson/

SEC looks into Deutsche Bank CDO shorted by Paulson

Tuesday, January 31, 2012

Deutsche Bank is facing an SEC investigation for its role in structuring a synthetic CDO, according to a report by Der Spiegel. The German publication states that the bank’s actions in raising a CDO under its Start programme will come under question after it allegedly allowed hedge fund Paulson to select assets to go into the fund. The bank is then said to have neglected to have told investors about Paulson’s role in the transaction as well as concealing the fact that the hedge fund had taken a short position on the assets, allowing it to profit as the deal collapsed.

According to the article, Goldman Sachs settled a similar case with the SEC for $500 million regarding Goldman’s role in arranging an Abacus CDO.

 

Reuters: Ex-Credit Suisse Manager Pleads Guilty in Subprime Bond Probe

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Editor’s Comment: So SOMEONE is going to jail for up to five years. But the meat of this lies between the lines.

First, it was a conspiracy charge. You can’t run a PONZI scheme the size of the Madoff scheme without channels that are sending “marks” to you to “invest.” The securitization scam is several hundred times the size of the Madoff scam, and that means there were literally thousands of traders and managers who knew that they were acting improperly — illegally, that is.

Second, Higgs told a Federal Judge that his criminal behavior consisted of manipulation and inflation of the cash bond position markings in his tradings book (called ABNI), in order to hide the losses. Most people will never know what that means. It simply means that the trades were kept out of the system where losses would be easily apparent.

There are numerous reports that the book was kept literally in pencil on paper, so they could change the contents or destroy the book if that became necessary. This is why tracking the the actual money trail becomes challenging but it can be done through what one of our senior analysts calls “reverse engineering. IN other words, take the money going into the system and see where it went or where the trail ends. This will give you sufficient clues to determine whether payments in part or in whole were made to REMICS upon whose behalf foreclosures are being filed. In most cases, the figures are wrong, the debt to the investor has been paid in whole or in part, and there is no default. That is why we do the loan level accounting for those readers who are willing to fight about it.

Sadly, this guy seems like the fall guy for what was ordered by his managers. HIs statement that he fooled Credit Suisse management rings hollow when you compare the facts and the the history of the business. It simply isn’t possible for these events to occur without senior management knowing what was going on. Their mantra is plausible deniability. Soon you will see other people, like Higgs, who “flip” and testify against the large Banks upon which they depended for employment at rates of compensation that were too high — unless you factor in the hush money.

www.reuters.com/article/2012/02/01/us-creditsuisse-charges-idUSTRE80U2HT20120201

Ex-Credit Suisse manager pleads guilty in subprime probe

NEW YORK |

(Reuters) – A former London-based Credit Suisse trader pleaded guilty to a criminal conspiracy charge on Wednesday, and he is cooperating with a U.S. government investigation on writedowns of subprime mortgage derivatives at the height of the financial crisis.

David Higgs told a federal judge in New York that while he was a managing director in the investment banking division of Credit Suisse in 2007 and 2008, he and others manipulated and inflated the cash bond position markings of a trading book, called ABNI, in order to hide losses.

“As a result of my actions, senior management of Credit Suisse was given the false impression that the ABNI book was profitable and caused Credit Suisse to report false year-end numbers for 2007 in their books and records,” Higgs said in court. “I did this because I wanted to remain in good favor with my boss, Kareem Seregeldin, and enhance my job performance.”

Higgs said Seregeldin and others he did not identify had known about the manipulation and assisted in it.

Higgs faces a maximum possible prison sentence of up to 5 years on the charge of conspiracy to commit falsification of books and records and to commit wire fraud. He was released on a $500,000 bond and will be allowed to return to his home in Britain while the investigation continues.

(Reporting By Grant McCool; Editing by Lisa Von Ahn)

 

Nevada AG Asks Pointed Questions to DOJ and HUD

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Hawaii did it, Nevada did it and now other states are doing it. Seeing the devastating effect on the state economy and the ensuing effects on the nation’s economy and the world finance, State Attorney generals are taking matters into their own hands, and pressing the points that hurt. The Banks don’t like it because it undermined their narrative. This year, 2012, is the year when most of the truth will come out and it will blow your mind to find out just how pernicious and pervasive this false, faked, securitization has been.

The number of foreclosures has plummeted in those states that have put up a fight. Why? Not because they were banned but because those states that require proof of authority to foreclose, proof of the accounting and the proof of settlement or the ability to mediate, have all but eliminated foreclosures. Now the question is how do we correct the corruption of the the title registries, get people restored to their homes and force the pretenders to compensate victims of fraud, forgery, and outright theft.

Catherine Cortez Masto has mastered the basics of securitization and she, like Beau Biden in Delaware, Schneiderman in New York, Coakley in Maine and others don’t like what they see — corroboration of some of the worst nightmares of conspiracy theorists.

It won’t be long before the investigations get traction and start picking up steam. Indictments will follow but not for a few months, at least.

You will hear words from these prosecutors that you never thought you would hear about the banks conduct, the transfer of wealth through theft, and the commission of crimes  too numerous to list here. As the momentum picks up, you will see thousands convicted, jailed, defrocked from their law license, notary license, appraisal license, title license and even the license to do business in the states where they thought they had a lock on the whole thing. People are wide awake right now and when Americans awaken, things happen fast.

Here are some of the more important questions and my comments that were posed in a recently released letter to Thomas J. Perrelli at the U.S. Department of Justice and Shaun Donovan as secretary of the U.S. Department of Housing and Urban Development. It would be a good idea to take out those template discovery forms you have for clients and start your revisions. Stop assuming that anything the Banks said was true and start assuming the everything they said was false — including the losses they claimed to get the bailouts.

1. What origination conduct did the federal agencies not release? [That's not my question, it is Masto's question. This is a direct frontal assault on the complicity of the Federal government in the mortgage mess. Inherently it addresses the issue of whether the origination process violated law, rules or regulations and whether there is a valid lien on most properties that were financed with investor money.]
2. The State release refers to “…brother and sister corporations…” Please provide some clarity as to this particular phrase as used in the state release. [Masto is not going to be papered over by vague wording that could mean anything. She wants to know what went on. Where did the money go, and who were the parties involved?]
3. The State release contains a provision that prevents the State AG’s and banking regulators from seeking to invalidate past assignments or foreclosures. Does this prevent States from effectively challenging future foreclosure actions that are based upon faulty prior assignments? [Masto nails it on the head. First of all this is AMNESTY for the Banks who committed crimes and want the government to ratify the crime since the government was complicit in allowing, creating and promoting the crime. It does nothing to clear up the title problems that currently exist or that will exist if the faulty assignments contain not only forgeries but fabrications of the truth of the transactions inherently referred to within the instruments.]
4. Paraphrasing Masto, when will the results of existing investigations be made public — or do you want us to take your word for it that there are or are not weapons of mass financial destruction still hidden in the pile?
5. Paraphrasing Masto, how will we be able toe enforce the new servicing standards or are we taking the word of the Banks and servicers who lied to us consistently up until this point in time?
6. Paraphrasing Masto, how and when will consumers get relief if they were victims of fraud, chicanery and theft?
7. Under what circumstances will the Monitor be able to access servicers source documents, i.e., the documents that form the underlying basis for the work papers? [Of course Masto knows that she will never see the source documents because they would contradict everything the Banks and servicers have said up until this point, one of many reasons she will not participate in the multi-state settlement.]
8. What kind of data will the monitor be able to demand regarding the allocation and performance of servicers’ modification/other consumer relief? What compliance or enforcement provisions address the Monitor’s and States’ ability to enforce the consumer relief provisions? Before the claim of securitization of mortgage debt that never in fact was completed, there were simple formulas to determine whether the workout was good or bad for the lender. Now the servicers are using excuses like “everyone will do it” if they accept modifications, even though the proposed modifications i results in proceeds that are much higher than the results of foreclosure. So the real question is whether the consideration of modifications requires (a) authority and (b) no discretion if the proposed modification exceeds x% of fair market value of the collateral. If accepted, this change would have eliminated 2/3 of all the past foreclosures and 90% of the future ones.
9. Please explain the assumptions on which the settlement value chart relies. It describes a maximum expected benefit; what is the minimum expected benefit? Can we get a range of values for each state.? [And what data exists showing the true liability for false, fraudulent, fabricated loans and foreclosures to compare with the settlement?]
10. Paraphrasing Masto, how do these detailed formulas actually work in real life? What will be the effect on blighted areas and how can we as AG’s determine what risk is associated with acceptance of an agreement in which the probability of millions more foreclosures will take place under false pretenses, only to become abandoned property?

 

Fannie and Freddie Preventing Modifications and Betting Against Modifications at the Same Time

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Freddie Mac, Deutsche Bank Caught Up In Securities Allegations

By: David Dayen See Full Article on FIredoglake.com

One reason why I don’t think we should particularly accept a six-month timeline on significant action from the RMBS working group is that there’s so much already in the public record. I recognize that criminal or civil enforcement actions take voluminous legal work and due diligence, but quite a bit of it has already been done. The FCIC referred criminal fraud violations a year ago. Gretchen Morgenson notes all the evidence from private litigation that can be leveraged and used. And Pro Publica, in conjunction with NPR, offers this up today, which is somewhat tangential to what Eric Schneiderman wants to delve into because it’s post-crash conduct, but which still shows the element we’re dealing with and how many revelations are already out there:

Freddie Mac has invested billions of dollars betting that U.S. homeowners won’t be able to refinance their mortgages at today’s lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom [...]

In December, Freddie’s chief executive, Charles Haldeman, assured Congress his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”

But public documents show that in 2010 and 2011, Freddie Mac set out to make gains for its own investment portfolio by using complex mortgage securities that brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing.

Those trades “put them squarely against the homeowner,” PIMCO’s Simon says.

Bascially, Freddie trapped its own borrowers, denying them refinances. And they stood to benefit from that, because the higher interest rates meant bigger streams of income from their MBS.

This may seem like a sidelight to the securitization bubble, but indeed, we’ve seen many instances of investment banks taking one side of a mortgage-backed securities bet, and selling investors the other side, without disclosure. That’s securities fraud. It’s been litigated. The SEC has been giving out settlements like candy for this kind of conduct. But it’s a central part of the unscrupulous behavior on Wall Street. You can see this today in the fact that the SEC is only now getting around to investigating CDOs from Deutsche Bank when Robert Khuzami, the current head of enforcement at the SEC and a co-chair of the RMBS working group, was working there as general counsel.

That brings up a whole other element about trusting the guys who swept this conduct under the rug to properly investigate it. But the larger point is that there’s a lot already on the table. In a sense, you may not need massive resources for this, because they can just pick up where others left off.

My reporting shows that Schneiderman actually has a few announcements on enforcement coming in the next few weeks. We don’t have to wait months. We can judge the seriousness of this thing pretty quickly.

 

Using UDCPA Fair Debt Collection Acts to get Money, Information and Fees

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RIPE AREA FOR STEADY INCOME FOR LAWYERS REPRESENTING HOMEOWNERS

Editor’s Comment: One small step for a man, one giant leap for mankind. You have both a private right of action against the debt collector and the right to apply to the FTC to set up administrative hearings, where these cases should probably be heard by experienced hearing officers who know what they are looking at.

The practice of playing the numbers on debt collection has been around for a long time. Whether the debt is real or not, there is a statute of limitations, bankruptcies and other obstacles to collection. A lot of times the debt is now owed at all, but byb pestering customers, the collection agency gets some money out of them, which they keep because they have already bought the portfolio at pennies or less on the dollar.

This is where servicers and other intermediaries in the fake securitization chain are going to get into hot water. The debt was created when the investor loaned the borrower the money. The intermediaries are by definition debt collectors under the UDCPA and they are, and have been banged for fines many times on individual cases.

This is an instance where the Obama administration is attacking the practice head-on and taking away their toys. So when the pretender lender comes knocking, it isn’t just a RESPA 6 (Qualified Written Request) that you send out, it is a UDCPA letter you send demanding to know both the identity and contact information for the creditor. As you can see from this article, failure to provide you with that information  plus the balance due and how it was computed, is a violation of that Federal Statute.

It might also be a shortcut way of identifying the pretender not as holder of the note but as agent for an undisclosed principal seeking to collect on a note that was defective in the first place because they did not identify the correct creditor (in violation of TILA) and it did not provide you with a proper accounting showing exactly what this “creditor” received that would reduce your loan balance.

The MAIN point here is that the servicer might well be the one sending you the notice of delinquency swhen they have performed zero due diligence as to the creditor’s accounting. Where the servicer itself or some other party is keeping the account current, as is often the case, the loan is neither delinquent nor susceptible to being declared in default — but they do it anyway.

Now that the FTC has declared war on debt collectors who perform illegally, and banged them with this fine, we can invoke the same administrative procedures and grievances with the FTC as to the collection efforts on mortgages where the “collector” is not the creditor and where the money demanded is not actually shown as due.

There is a presumption that if you didn’t make the payment as set forth in the note, then you must be delinquent and you must be declared (at some point) in default. But that is not true in most cases. There can only be a delinquency or default under the mortgage loan if the borrower has failed to make a payment or cure a payment that is actually due. If the payment has been made already, then no such payment is due, regardless of whether it came from the borrower or not.

This is why you need to know the four legs of the stool in order to object, sue, defend, and present genuine issues of fact before a trial court that will have no choice but to allow you to proceed to discovery. Discovery is where these cases settle because the pretenders know they didn’t fund the loan, they didn’t pay for the loan and the creditor has been paid in whole or in part, with a lower or zero balance remaining.

Just for reminders, the four legs of the stool are:

1. The loan closing papers with the investors under which he agrees to advance funds into a pool in exchange for a note or bond from a REMIC (which is never properly constituted). Here the investors expects that the money advanced will be used for funding mortgages conforming with the standards set forth in the prospectus and pooling and servicing agreement. Note that there is no nexus or connection between the investor and the borrower because the borrower usually does not even exist at that point in time. If a nexus ever arises, it is when the loan is transferred into the pool, something which we all now know was never done until the loan went into litigation or foreclosure — obviously in violation of the cut-off date required by the IRS REMIC statute, and the concurrent cut-off date in the PSA. But more importantly is the money angle — the investors didn’t advance money for loans that were delinquent or in default. They invested their money for good quality performing loans. Thus there is no way that the loans could be transferred into the pools if they were already declared problematic, delinquent, or non-performing. The failure to provide a nexus between borrower and lender (investor) is fatal to the enforcement of the mortgage lien. The creditor has no interest in the loan and doesn’t want one. Any claim from third parties who also have no nexus with the borrower would be on causes of action that are separate or apart from the mortgage lien. (SEE COMBO TITLE AND SECURITIZATION REPORT ABOVE)
2. The loan closing papers with the borrower(s), which are subject to roughly the same analysis with identical result. There is no nexus between the borrower and the investor because neither one knows the other, despite requirements in the TILA and RESPA laws that require disclosure of parties and their compensation. (SEE FORENSIC ANALYSIS TILA+ REPORT on Livinglies-store.com) The note does not describe the actual monetary transaction between the investor lender and the borrower. Instead it inserts a straw-man as “lender” and a straw-man as “beneficiary”. This usually takes the form of a new animal in mortgage lending called an “originator” who is a paid fee service provider whose sole duty is to pretend to be the lender, even though they never funded the loan, never bought the loan and never had any interest in the debt, the note or the mortgage. This is deemed by many in the title industry as a corrupted document that breaks the chain of title if any action was taken on such a loan in foreclosure. 
3. The actual money trail which varies from both the requirements set forth in the paperwork with the investor lender and the paperwork with the homeowner borrower. A full accounting would show that the parties in the middle without any interest in the loan, bought, sold, transferred and used those fabricated, forged documents to initiate foreclosure and eviction proceedings. Under the investor documentation, the pretenders are allowed to use a legal PONZI scheme in which the investors money is used to pay him his interest income, although it is not reported as such. The servicer also has the option of taking money from other revenue and pools and paying certain investors in complete  violation of the explicit requirements of any standard promissory note from a borrower requiring that payments be credited to the account of the borrower. Instead, they make the payment and do not credit the borrower or they receive the money and they pay neither the investors nor the give credit to the borrowers. (see Loan Level Accounting REPORT on Livinglies-store.com). The servicers and intermediaries and attempting, with some success to take over the position of the investor without an assignment from the investor, and enforce a mortgage to which they are not a party.
4. The Fourth legal of the stool arises from the false representations made in court or foreclosure proceedings. These representations made by people who purport to be authorized to substitute trustees, or file notice of defaults, notice of sales, notice of evictions, or lawsuits for all of those in judicial states, turn out to be at variance with all three of the other legs of the stool — the investor paperwork, the borrower’s paperwork and the actual money trail. 

Using a service like Elite Litigation Management services or others to present the matrix, which we also offer at livinglies-store.com, dial 480-405-1688, and you can present a poster-size board that shows a number of the discrepancy between all four legs of the stool, thus giving rise to the question of fact necessary to get to the next step in litigation. remember, if you go in thinking you have a magic bullet that will end your case, you are dreaming of a better worked than the one we have.

F.T.C. Fines a Collector of Debt $2.5 Million

See Full Article on New York Times and Firedoglake.com

By TARA SIEGEL BERNARD

The Federal Trade Commission signaled on Monday that it would continue to crack down on debt collectors who harass consumers for money they may not even be legally obligated to pay.

In the second-largest penalty ever levied on a debt collector, the F.T.C. said that Asset Acceptance, one of the nation’s largest debt collection companies, had agreed to pay a $2.5 million civil penalty to settle charges that the company deceived consumers when trying to collect old debts.

The settlement is part of a broader effort to patrol the industry, agency officials said.

“Our attention to debt collection has increased over the past couple of years because the complaints have been on the rise,” said J. Reilly Dolan, assistant director for the F.T.C.’s division of financial practices.

Consumer complaints about debt collection companies consistently rank as the second-highest category among all complaints at the agency, behind identity theft. But in 2010, complaints jumped 17 percent to 140,036, which represented 11 percent of all complaints in the commission’s database, up from 119,540, or about 9 percent of complaints, in 2009.

Asset Acceptance, based in Warren, Mich., was charged with a variety of complaints, including failing to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The company’s collectors also failed to inform consumers that paying even a small portion of the amount owed would revive the debt — in other words, making a payment would extend the amount of time the collector could legally sue.

Debt collectors have only a certain number of years to sue consumers. The statute of limitations varies by state, but typically ranges from two to 15 years, Mr. Dolan said, beginning when a consumer fails to make a payment. But borrowers often do not realize that making a payment on the old debt may restart the clock.

Among other things, the complaint also contended that the company — which buys unpaid debts for pennies on the dollar from credit card companies, health clubs and telecommunications and utility providers and tries to collect them — reported inaccurate information about the consumers to the credit reporting agencies. It also said that Asset Acceptance failed to conduct a reasonable investigation when it was notified by one of the credit agencies that a debt was being disputed. Moreover, the complaint says that the company used illegal collection practices and that it continued to try to collect debts that consumers disputed even though the company failed to verify that the debt was valid.

The proposed settlement with Asset Acceptance requires the company to tell consumers whose debt may be too old to be collected that it will not sue. It also requires the company to investigate disputed debts and to ensure it has a reasonable basis for its claims before going after the consumer. It is also barred from placing debt on credit reports without notifying the consumer.

The penalty “is certainly a slap on the wrist and probably a little bit more, but it really depends on what the F.T.C. does to enforce this in the coming months and years,” said Robert Hobbs, deputy director at the National Consumer Law Center and author of “Fair Debt Collection” (National Consumer Law Center, 1987). But “it is a great step forward. It is not self-enforcing, and it has a mechanism for the F.T.C. to follow up.”

Still, while the settlement requires the company to take more responsibility for checking the statute of limitations before it contacts consumers, he said most states did not require debt collectors to do that. That means it is up to consumers to know the rules on the statute of limitations, which, he said, can be “an enormously complex legal question.”

In a statement, Asset Acceptance said that the settlement ended an F.T.C. investigation that began nearly six years ago, and that the company did not admit to any of the allegations. “We are pleased to have this matter behind us, and to have clarity on the F.T.C.’s policies and expectations of the debt collection industry,” said Rion Needs, president and chief executive of Asset Acceptance.

In March, another leading debt collection company, West Asset Management, agreed to pay $2.8 million, the largest civil penalty ever levied by the F.T.C., to settle charges that its collection techniques violated the law. The commission charged that West Asset’s collectors often called consumers multiple times a day, sometimes using rude and abusive language, about accounts that were not theirs. The Consumer Financial Protection Bureau and the F.T.C. now share enforcement authority for debt collection companies, though the new bureau has a power that the F.T.C. did not: it can write new rules for debt collectors. But F.T.C. officials said that debt collection enforcement would remain a top priority.

 

Are the Prosecutions Real or Just PR for an Election Year?

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Private Litigants Still Doing the Heavy Lifting that Government Should be Doing

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By GRETCHEN MORGENSON

PRESIDENT OBAMA told the nation last week that he was convening a task force to investigate the abusive practices in the mortgage industry that led to our economic woes. Both lending and the practice of bundling loans into securities will come under scrutiny, he said, adding: “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”

Some greeted this new task force — its unwieldy name is the Residential Mortgage-Backed Securities Working Group — with skepticism. It is an election year, after all, and many might wonder if this is just a public-relations response to the outrage against the institutions and executives that almost wrecked the economy.

If this task force nailed some big names, and soon, it would help to allay deep suspicions that the authorities have given powerful people and institutions a pass during this awful episode.

Such bars typically last five years, but some are permanent. The S.E.C.’s settlement with Angelo Mozilo, 73, former head of Countrywide Financial, barred him from acting as a director or officer of a public company for the rest of his life.

Some cases on the list are still being litigated. Those that have been settled have generated $1.97 billion in penalties, disgorgement and other monetary relief, according to the S.E.C. Harmed investors have received $355 million of that.

Drilling into the details, though, indicates that little of this money was paid by individuals. The payments came from companies, or more precisely, their shareholders.

Talk about making the wrong people pay.

Only one of the cases seems to involve a clawback of executive compensation. It’s the 2009 case against three former top executives of New Century Financial, a quintessential Wild West lender. Together, the three paid $1.5 million when settling charges of making false and misleading statements about the company’s soundness as it imploded.

If this is justice, it’s certainly not rough. Brad Morrice, the company’s former chief executive, returned just $542,000 to regulators; he took home at least $2.9 million in incentive pay in the two years before New Century collapsed.

It seems obvious that until executives are forced to dig deep into their own pockets to pay penalties in these matters, they will be tempted to take as many risks as possible to generate fat paychecks. Then they will move on to the next opportunity.

The S.E.C. is clearly proud of its financial crisis cases. But comparing its tally with the mountainous evidence produced in private lawsuits shows how much more work there is to be done.

Consider the most recent complaint filed by the Assured Guaranty Corporation, an insurer of mortgage securities, against Bear Stearns, the defunct brokerage firm; EMC, Bear’s mortgage origination and servicing unit; and JPMorgan Chase, which bought Bear in March 2008.

Filed in November, the complaint shows what kinds of revealing material can be dug up by determined investigators.

The complaint contends that Bear Stearns knew it was stuffing its mortgage-backed securities with crummy loans. It cites an e-mail written by a former EMC analyst in the unit that dealt with these instruments. “I have been toying with the idea of writing a book about our experiences,” the analyst wrote. “Think of all of the crap that went on and how nobody outside of the company would believe us … the fact that data was constantly changing and we sold loans without the data being correct — wouldn’t investors who bought the MBS’s want to know that?”

Indeed they would.

Discovery in the case also identifies top executives who oversaw the mortgage machine that felled Bear Stearns. Thomas F. Marano, senior managing director and designated principal of the mortgage- and asset-backed securities department, was “well aware of the amount of risk that was being taken on in terms of acquiring assets and … the activities with respect to securitization,” the complaint said, citing a Bear Stearns executive’s deposition.

The complaint also contends that John Mongelluzzo, the Bear Stearns vice president for due diligence, misled investigators for the Financial Crisis Inquiry Commission when he described the extensive vetting the company did when it bundled mortgages.

Mr. Mongelluzzo told the commission that Bear Steams tested “all of the due diligence firms and their contract underwriters, and if they couldn’t pass the underwriting test, they weren’t permitted to work on our transactions,” the complaint said. He also told the investigators that the company “instituted a process where we went out and audited the individual diligence firms to see what their processes were and what they were doing internally as well.”

But in a subsequent deposition, Mr. Mongelluzzo conceded that Bear had not started to test its underwriters until February 2007, well after the mortgage market had begun crumbling, and that it didn’t begin its audit program of due diligence vendors until April 2007.

Mr. Marano is now chairman and chief executive of Residential Capital, the mortgage unit of Ally Financial. Mr. Mongelluzzo is an executive there as well. Both declined to comment.

It is to be expected that investigators for private law firms will turn up loads of ammunition to help them in their court battles. But in the past, law enforcement was similarly aggressive in its own pursuits.

Now, the balance seems to have shifted, with private litigants doing more legal heavy lifting than those who serve the public.

Perhaps the new working group will right this imbalance. But its members don’t have a lot of time, with the election coming. Private litigants have drawn a pretty clear road map for the places that this new group might go. Its leaders should welcome the assistance, given that the clock is ticking.

Cuomo Appoints New Cop: Homeowners Hopeful That Truth Will be Revealed

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Expanding Reach, Cuomo Creates Second Cop on Financial Beat

By DANNY HAKIM

ALBANY — Benjamin M. Lawsky is not the attorney general of New York State.

But one could be forgiven for being confused. Since Gov. Andrew M. Cuomo installed him as superintendent of a new state agency, the Department of Financial Services, which became active in October, Mr. Lawsky has been making headlines normally associated with attorneys general.

He has forced insurers to turn over more than $100 million in unpaid death benefits to surviving family members, dispatched rafts of subpoenas to banks, and pressed lenders to curb abusive foreclosure practices.

Critics say the new financial services agency reflects Mr. Cuomo’s expansive view of his executive powers, which he has continually sought to strengthen during his 13 months in office. They also see an attempt by the governor to encroach on the turf of Attorney General Eric T. Schneiderman, a fellow Democrat with whom Mr. Cuomo has had a precarious relationship.

Supporters say it is an auspicious time to have two cops on the financial beat — after all, the agency, which subsumed the existing Banking and Insurance Departments, came into being as the Occupy Wall Street movement was finding its footing and focusing its critique on those very industries.

Mr. Lawsky, in his first few months on the job, is using a playbook that he helped write as a top lieutenant in the attorney general’s office when Mr. Cuomo held that post, gravitating toward headline-grabbing cases while looking for negotiated solutions with industry executives.

“We set our priorities here often simply based on what the big issues are,” Mr. Lawsky, 41, said in an interview. “Does that come from the world of Andrew Cuomo? Yes, because government shouldn’t be a waste of time. Government should be about making a difference in people’s lives.”

For his part, Mr. Schneiderman has not allowed himself to be rolled over.

Last year, he helped beat back an effort by Mr. Cuomo’s office to give Mr. Lawsky and the new agency even more expansive powers that would have cut into the heart of the attorney general’s jurisdiction. The governor’s proposal, which would have allowed Mr. Lawsky to investigate violations of the Martin Act, the sweeping state securities law used by former Gov. Eliot Spitzer and his successors to pursue financial malfeasance, alarmed Wall Street and even academics.

Writing in The New York Law Journal, Jonathan R. Macey, a Yale Law School professor, called it “a naked and highly suspicious power grab.”

And in a recent interview, John C. Coffee Jr., a law professor at Columbia University, put it this way: “Cuomo made his fame as attorney general, and he sort of treated that jurisdiction as portable and took it with him as governor.”

The Cuomo administration backed off, dropping the Martin Act provision. Nonetheless, the new agency, besides absorbing two major regulatory bodies, has gained a number of new powers. It has broader authority to fight fraud beyond the insurers and state-chartered banks it licenses, and its reach has extended to all manner of financial products, including student lending, credit cards and tax refund anticipation loans.

Eric R. Dinallo, a partner at Debevoise & Plimpton and former state insurance superintendent, likened the new agency to the Securities and Exchange Commission, in the way it combines regulation and enforcement under one roof.

“It’s not common to have a combined regulatory and enforcement function,” he said, adding, “It’s effectively very competitive with the attorney general’s jurisdiction.”

The two agencies are publicly cordial, but behind the scenes they are much like two boxers feeling each other out in an opening round. Already, turfs are overlapping.

Mr. Schneiderman, a liberal-minded attorney general, made a national name for himself in his first year by spurning a settlement that the Obama administration and other attorneys general had been negotiating with the banking industry over foreclosure practices. Then last week, President Obama, vowing to get tougher on Wall Street, reached out to Mr. Schneiderman, naming him co-chairman of a new financial crimes unit to prosecute large-scale financial fraud.

At the same time, Mr. Cuomo, in his State of the State address this month, turned to Mr. Lawsky, not Mr. Schneiderman, on the issue, directing the Department of Financial Services to create a Foreclosure Relief Unit. And Mr. Lawsky has moved on his own to secure deals with smaller lenders on curbing abuses.

Asked whether he supported Mr. Schneiderman’s stance on the national negotiations, Mr. Lawsky was noncommittal.

“We’re not commenting at all on the ongoing negotiations because we are at least tangentially a part of them and could ultimately be called on to sign or not sign,” he said, adding, “We want to see what the final proposal is.”

Danny Kanner, a spokesman for Mr. Schneiderman, said in a statement that the two offices “will continue to work together toward our common purpose of protecting consumers, investors, and the integrity of New York’s global markets.”

“In the aftermath of the financial crisis,” the statement said, “we need more willing hands on deck, not less, to meet that critical objective.”

Mr. Lawsky said he was learning to balance the roles of regulator and enforcer. And during his years as a top aide to Mr. Cuomo, Mr. Lawsky has been known as one of the relatively few administration officials to play nicely with others.

“A lot of people like to paint me as a tough guy because I’m a former prosecutor,” he said, adding: “You are being handed a huge amount of power over people’s lives and their businesses. It’s not something you willy-nilly bang people over the head with.”

Mr. Lawsky grew up in New York and Pittsburgh, received his undergraduate and law degrees from Columbia, and worked under four United States attorneys for the Southern District of New York, prosecuting everything from insider trading to terror and mob cases. He is a runner, but last had time to train for and run a marathon — the Marine Corps Marathon — in 2009. (His time was 3:40:17.)

Perhaps his most notable early achievement has been putting pressure on health insurers to make public proposed rate increases. But his office also pointed to early relationships he has formed with both industry executives and consumer groups.

Theodore A. Mathas, chief executive of the New York Life Insurance Company, said, “Ben is approachable, he’s a good listener and he’s quickly grasped a lot of complex things we’ve thrown at him.” Michael P. Smith, president of the New York Bankers Association, said, “We are very pleased with his performance.”

On the consumer advocacy side, Charles Bell, programs director for Consumers Union, said, “We’ve been pleased that they have reached out,” adding that a group of consumer advocates was meeting with the agency monthly on a variety of topics.

Mr. Lawsky does know how to answer the tough questions. During a recent online question-and-answer session with the public, the first questioner asked: “Mr. Lawsky, are you copying the governor’s hairstyle? It seems you have a similar look.” He replied: “That never occurred to me. It’s very flattering. Thanks.”

 

Occupy Protesters and Police Clash in Oakland

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By SARAH MASLIN NIR

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A march to take over a vacant building by members of the Occupy movement in Oakland, Calif., turned into a violent confrontation with the police on Saturday, leaving three officers injured and about 200 people arrested.

The clashes began just before 3 p.m. when protesters marched toward the vacant Henry J. Kaiser Convention Center, the police said, and began to tear down construction barricades. Officers ordered the crowd to disperse when protesters “began destroying construction equipment and fencing,” the Oakland police said in a press release.

“Officers were pelted with bottles, metal pipe, rocks, spray cans, improvised explosive devices and burning flares, the police said.” Officers responded with smoke, tear gas and beanbag projectiles. Twenty people were arrested.

Most of the arrests occurred in the evening, when large groups of people were corralled in front of the Downtown Oakland Y.M.C.A. on Broadway. At one point, one group of protesters broke into the City Hall building.

On a livestream broadcast on the Web site oakfosho.com, dozens of protesters could be seen sitting cross-legged in darkness on the street in front of the Y.M.C.A. Their hands appeared to be bound behind them, while police officers stood watch. Occasionally the protesters sang or cheered.

The events were part of a demonstration dubbed “Move-in Day,” a plan by protesters to move into the vacant convention center and use it as a commune-like command center, according to the Web site occupyoaklandmoveinday.org.

“We were going to set up a community center,” said Benjamin Phillips, 32, a member of the Occupy Oakland media team. “It would be a place where we could house people, feed people, do all the things that we have been doing.”

In an open letter to Mayor Jean Quan on the Move-in Day site, the group threatened actions like “blockading the airport indefinitely, occupying City Hall indefinitely” and “shutting down the Oakland ports.” Occupy protesters did briefly shut down the city’s busy port in November.

In a statement issued before the march, Ms. Quan said that “the residents of Oakland are wearying of the constant focus and cost to our city.” On Saturday night, she added: “Once again, a violent splinter group of the Occupy Movement is engaging in violent actions against Oakland. The Bay Area Occupy Movement has got to stop using Oakland as their playground.”

In a statement, city officials said the total number of arrests was estimated at 200.

Ms. Quan has spent her first term embattled by the Occupy movement, which installed itself in Frank H. Ogawa Plaza in October. After initially embracing the protest, she ordered the encampment removed from the plaza.

After a series of violent episodes, including a clash in which a Marine veteran of Iraq suffered a fractured skull when struck by a projectile in a confrontation with the police, Ms. Quan relented and permitted the protesters to return to the plaza. But two weeks later, in response to fears of renewed violence, she ordered the plaza cleared again.

Mr. Phillips, who said he is a veteran of the United States Air Force, spoke Saturday night from his home on Grand Avenue where he had stopped to rinse tear-gas residue from his contact lenses. He described the scene in front of the Y.M.C.A. as “terrifying.”

“This is disgusting, because this is not the way that America is supposed to work,” he said. “You’re supposed to be able to have something like freedom to assemble and air your grievances,” he said.

“It’s bizarre,” he said of the police reaction. “It’s not something you expect to see in the United States, and we’ve seen it over and over in Oakland.”

 

 

FLORIDA HOMES OWNED BY 8 LARGEST BANKS ON 1-24-2012

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Editor’s Note: As Lynn knows, these are the official figures. But the properties were deeded based upon false premises. First the credit bid wasn’t submitted by a creditor. Second the foreclosure process was defective, fraudulent and filled with forged or incomplete documents. And third, the mortgage documents themselves were defective because they failed to properly recite the terms of the transaction — from the identity of the creditor to the use of proceeds from securitization and how that would impact the amount due when third parties made payments to the creditor. Accounting for creditors (investors) is always absent.

Anyone who buys an REO property assumes the risk that the chain of title is so defective that the old homeowner can come back and claim it.

www.frauddigest.com/blog/2012/01/28/big-bank-homeowners

BIG BANK HOMEOWNERS

Lynn E. Szymoniak, Esq., Ed., Fraud Digest, January 28, 2012

In most counties, the records of the county property appraiser identify the homeowners in the county.

In January, 2012, in Palm Beach County, Florida, for example, 11 banks, FANNIE and FREDDIE and one mortgage servicer were the biggest homeowners, with 2,907 homes owned in total. Palm Beach County is the third largest county, by population, in Florida.

The banks and servicer owned 2,284 homes; FANNIE & FREDDIE owned 623 homes.

Three of the banks, Bank of America, Wells Fargo and Deutsche Bank, owned more homes than FANNIE.

Wells Fargo (including Wachovia) was the largest homeowner, owning 551 homes.

Bank of America and Deutsche Bank were close second and third largest, owning 496 homes and 454 homes, respectively. (The Bank of America total represents homes owned by Bank of America, BAC Home Loans Servicing and Countrywide.)

FANNIE owned 441 homes; FREDDIE owned 182 homes.

Bank of New York, the trustee for hundreds of Countrywide trusts, owned 338 homes.

U.S. Bank, the trustee for many Bear Stearns trusts, owned 196 homes

HSBC bank, the trustee for almost all of the Deutsche Bank Securities trusts, owned 175 homes.

JP Morgan Chase, including the homes owned by Chase Mortgage, and the Chase subsidiaries, Homesales, Inc. and Homesales of Delaware, Inc., owned a relatively low 174 homes.

Aurora Loan Services, keeper of most of the Lehman Brothers loans, was in 10th place among the large homeowners, with 149 homes.

Citibank, including Citimortgage, was the only other bank owning over 100 homes, with 111 homes.

Suntrust owned 82 homes; IndyMac/OneWest owned 54 homes; and GMAC owned 31 homes.

Home ownership in Florida’s 33 counties with population of 100,000 or greater as of January 24, 2012, is set forth below. The 34 counties with populations under 100,000 have a combined population of 1,278,080, approximately the population of Hillsborough County. The home ownership of Hillsborough has been used to approximate the ownership in these 34 counties.

FLORIDA HOMES OWNED BY 8 LARGEST BANKS ON 1-24-2012: 22,112

FLORIDA HOMES OWNED BY FANNIE & FREDDIE ON 1-24-2012: 7,170

FL HOMES OWNED BY BANK OF AMERICA ON 1-24-2012: 5,143

FL HOMES OWNED BY WELLS FARGO ON 1-24-2012: 4,727

FL HOMES OWNED BY DEUTSCHE BANK ON 1-24-2012: 3,114

FL HOMES OWNED BY BANK OF NEW YORK ON 1-24-2012: 2,855

1 – MIAMI-DADE COUNTY (pop. 2,496,435)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 650
BANK OF NEW YORK: 367
CHASE: 254
CITIBANK: 222
DEUTSCHE BANK: 676
FANNIE: 515
FREDDIE: 213
HSBC: 324
U.S. BANK: 121
WELLS FARGO: 579
BANKS: 3,193/F & F: 728

2 – BROWARD COUNTY (pop. 1,748,066)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 624
BANK OF NEW YORK: 479
CHASE: 157
CITIBANK: 99
DEUTSCHE BANK: 445
FANNIE: 712
FREDDIE: 188
HSBC: 205
U.S. BANK: 489
WELLS FARGO: 493
BANKS: 2,991/F & F: 900

3 – PALM BEACH COUNTY (pop. 1,320,134)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 497
BANK OF NEW YORK: 338
CHASE: 180
CITIBANK: 111
DEUTSCHE BANK: 454
FANNIE: 441
FREDDIE: 182
HSBC: 175
U.S. BANK: 196
WELLS FARGO: 551
BANKS: 2,502/F & F: 623

4 – HILLSBOROUGH COUNTY (pop: 1,229,226)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 220
BANK OF NEW YORK: 116
CHASE: 40
CITIBANK: 30
DEUTSCHE BANK: 152
FANNIE: 265
FREDDIE: 83
HSBC: 84
U.S. BANK: 138
WELLS FARGO: 197
BANKS: 977/F & F: 348

5 – ORANGE COUNTY (pop. 1,145,956)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 278
BANK OF NEW YORK: 31
CHASE: 102
CITIBANK: 49
DEUTSCHE BANK: 130
FANNIE: 500
FREDDIE: 126
HSBC: 83
U.S. BANK: 120
WELLS FARGO: 216
BANKS: 1,009/F & F: 626

6 – PINELLAS COUNTY (pop. 916,542)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 166
BANK OF NEW YORK: 99
CHASE: 16
CITIBANK: 28
DEUTSCHE BANK: 113
FANNIE: 47
FREDDIE: 0
HSBC: 40
U.S. BANK: 143
WELLS FARGO: 181
BANKS: 786/F & F: 47

7 – DUVAL COUNTY (pop. 864,263)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 208
BANK OF NEW YORK: 116
CHASE: 93
CITIBANK: 30
DEUTSCHE BANK: 93
FANNIE: 204
FREDDIE: 93
HSBC: 40
U.S. BANK: 90
WELLS FARGO: 240
BANKS: 910/F & F: 297

8 – LEE (pop. 618,754)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 357
BANK OF NEW YORK: 208
CHASE: 52
CITIBANK: 48
DEUTSCHE BANK: 112
FANNIE: 411
FREDDIE: 100
HSBC: 52
U.S. BANK: 157
WELLS FARGO: 190
BANKS: 1,176/F & F: 511

9 – POLK (pop. 602,095)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 210
BANK OF NEW YORK: 79
CHASE: 38
CITIBANK: 30
DEUTSCHE BANK: 86
FANNIE: 153
FREDDIE: 58
HSBC: 34
U.S. BANK: 93
WELLS FARGO: 130
BANKS: 697/F& F: 211

10 – BREVARD (pop. 543,376)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 127
BANK OF NEW YORK: 67
CHASE: 25
CITIBANK: 10
DEUTSCHE BANK: 44
FANNIE: 144
FREDDIE: 42
HSBC: 18
U.S. BANK: 53
WELLS FARGO: 108
BANKS: 452/F& F: 186

11 – VOLUSIA (pop. 494,593)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 95
BANK OF NEW YORK: 88
CHASE: 26
CITIBANK: 14
DEUTSCHE BANK: 59
FANNIE: 50
FREDDIE: 43
HSBC: 26
U.S. BANK: 61
WELLS FARGO: 99
BANKS: 468/F& F: 93

12 – SEMINOLE (pop. 422,718)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 107
BANK OF NEW YORK: 81
CHASE: 24
CITIBANK: 11
DEUTSCHE BANK: 48
FANNIE: 146
FREDDIE: 41
HSBC: 23
U.S. BANK: 25
WELLS FARGO: 76
BANKS: 395/F& F: 187

13 – PASCO (pop. 464,697)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 102
BANK OF NEW YORK: 53
CHASE: 21
CITIBANK: 17
DEUTSCHE BANK: 64
FANNIE: 174
FREDDIE: 28
HSBC: 33
U.S. BANK: 74
WELLS FARGO: 95
BANKS: 459/F& F:202

14 – SARASOTA (pop. 379,448)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 110
BANK OF NEW YORK: 81
CHASE: 16
CITIBANK: 13
DEUTSCHE BANK: 51
FANNIE: 157
FREDDIE: 46
HSBC: 23
U.S. BANK: 38
WELLS FARGO: 134
BANKS: 466/F& F: 203

15 – MARION (pop. 331,298)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 90
BANK OF NEW YORK: 18
CHASE: 19
CITIBANK: 9
DEUTSCHE BANK: 31
FANNIE: 87
FREDDIE: 28
HSBC: 16
U.S. BANK: 38
WELLS FARGO: 98
BANKS: 319/F& F: 115

16 – MANATEE (pop. 322,833)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 117
BANK OF NEW YORK: 40
CHASE: 8
CITIBANK: 14
DEUTSCHE BANK: 37
FANNIE: 77
FREDDIE: 18
HSBC: 22
U.S. BANK: 52
WELLS FARGO: 396
BANKS: 686/F& F: 95

17 – COLLIER (pop. 321,520)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 121
BANK OF NEW YORK: 54
CHASE: 18
CITIBANK: 16
DEUTSCHE BANK: 33
FANNIE: 120
FREDDIE: 33
HSBC: 25
U.S. BANK: 28
WELLS FARGO: 79
BANKS: 374/F& F: 153

18 – ESCAMBIA (pop. 297,619)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 30
BANK OF NEW YORK: 27
CHASE: 3
CITIBANK: 10
DEUTSCHE BANK: 26
FANNIE: 62
FREDDIE: 23
HSBC: 17
U.S. BANK: 46
WELLS FARGO: 40
BANKS: 199/F& F: 85

19 – LAKE (pop. 297,052)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 51
BANK OF NEW YORK: 38
CHASE: 12
CITIBANK: 5
DEUTSCHE BANK: 28
FANNIE: 91
FREDDIE: 35
HSBC: 14
U.S. BANK: 40
WELLS FARGO: 75
BANKS: 263/F& F: 126

20 – ST. LUCIE (pop. 277,789)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 110
BANK OF NEW YORK: 47
CHASE: 27
CITIBANK: 9
DEUTSCHE BANK: 59
FANNIE: 132
FREDDIE: 40
HSBC: 33
U.S. BANK: 65
WELLS FARGO: 76
BANKS: 426/F& F: 172

21 – LEON (pop. 275,487)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 23
BANK OF NEW YORK: 12
CHASE: 7
CITIBANK: 2
DEUTSCHE BANK: 9
FANNIE: 44
FREDDIE: 12
HSBC: 4
U.S. BANK: 16
WELLS FARGO: 33
BANKS: 106/F& F: 56

22 – OSCEOLA (pop. 268,685)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 134
BANK OF NEW YORK: 3
CHASE: 30
CITIBANK: 6
DEUTSCHE BANK: 10
FANNIE: 103
FREDDIE: 29
HSBC: 7
U.S. BANK: 10
WELLS FARGO: 55
BANKS: 255/F& F: 132

23 – ALACHUA (pop. 247,336)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 36
BANK OF NEW YORK: 9
CHASE: 6
CITIBANK: 4
DEUTSCHE BANK: 11
FANNIE: 39
FREDDIE: 14
HSBC: 3
U.S. BANK: 19
WELLS FARGO: 40
BANKS: 128/F& F: 53

24 – CLAY (pop. 190,865)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 39
BANK OF NEW YORK: 16
CHASE: 7
CITIBANK: 2
DEUTSCHE BANK: 17
FANNIE: 43
FREDDIE: 7
HSBC: 11
U.S. BANK: 22
WELLS FARGO: 29
BANKS: 143/F& F: 50

25 – ST. JOHNS (pop. 190,039)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 40
BANK OF NEW YORK: 33
CHASE: 6
CITIBANK: 11
DEUTSCHE BANK: 14
FANNIE: 56
FREDDIE: 31
HSBC: 8
U.S. BANK: 29
WELLS FARGO: 58
BANKS: 203/F& F: 87

26 – OKALOOSA (pop. 180,822)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 35
BANK OF NEW YORK: 27
CHASE: 2
CITIBANK: 8
DEUTSCHE BANK: 19
FANNIE: 50
FREDDIE: 12
HSBC: 8
U.S. BANK: 24
WELLS FARGO: 16
BANKS: 139/F& F: 62

27 – HERNANDO (pop. 172,778)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 53
BANK OF NEW YORK: 41
CHASE: 13
CITIBANK: 3
DEUTSCHE BANK: 24
FANNIE: 82
FREDDIE: 26
HSBC: 15
U.S. BANK: 30
WELLS FARGO: 47
BANKS: 226/F& F: 108

28 – BAY (pop. 168,852)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 43
BANK OF NEW YORK: 39
CHASE: 13
CITIBANK: 2
DEUTSCHE BANK: 25
FANNIE: 70
FREDDIE: 18
HSBC: 7
U.S. BANK: 21
WELLS FARGO: 21
BANKS: 171/F& F: 88

29 – CHARLOTTE (pop. 159,978)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 110
BANK OF NEW YORK: 59
CHASE: 15
CITIBANK: 4
DEUTSCHE BANK: 29
FANNIE: 22
FREDDIE: 23
HSBC: 18
U.S. BANK: 41
WELLS FARGO: 56
BANKS: 332/F& F: 45

30 – SANTA ROSA (pop. 151,372)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 30
BANK OF NEW YORK: 13
CHASE: 1
CITIBANK: 5
DEUTSCHE BANK: 8
FANNIE: 34
FREDDIE: 10
HSBC: 3
U.S. BANK: 10
WELLS FARGO: 33
BANKS: 103/F& F: 44

31 – MARTIN (pop. 146,318)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 22
BANK OF NEW YORK: 6
CHASE: 5
CITIBANK: 2
DEUTSCHE BANK: 18
FANNIE: 53
FREDDIE: 9
HSBC: 11
U.S. BANK: 15
WELLS FARGO: 33
BANKS: 112/F& F: 62

32 – CITRUS (pop. 141,236)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 50
BANK OF NEW YORK: 27
CHASE: 6
CITIBANK: 3

 

 

FED White Paper Identifies Negative Equity as Primary Economic Problem

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EDITORIAL NOTES: The principal problem I see is that while the Fed and other agencies are still getting their heads wrapped around what occurred in the mortgages mess, they still barely notice the elephant in the living room because if you remove the distraction it will reveal basic flaws and defects in the debts, the notes and security instruments (mortgages and deeds of trust) that are present in the system. It will also reveal the fact that the transfer documents, even if they were real, are in conflict with (a) the provisions of the enabling documents that were meant to create the blueprint of securitizing residential mortgage debt and specifically (b) the transfer of non-performing loans into the alleged pools — an event that no investor would approve.

The focus on all these proposals and white papers is to preserve the integrity of the mortgage lending process that was employed and to preserve the integrity of the foreclosures that followed. These premises are false and they cannot be made true by saying so, or by establishing a national registry for lien (in violation of states rights under the U.S. Constitution) or otherwise.

The reality is that nearly all the mortgages, whether declared delinquent or not, involve debts that have not been liquidated or determined by a full accounting. Further each debt is subject to third party payments that either cured any alleged default or reduced the principal due, or both. Thus the “credit bid” at the auction was defective unless the bid was reduced by payments received but unaccounted for previously by the creditor. The absence of the creditor from the courtroom or at any part of the process prevents the court, the trustee on the deed of trust, and the borrower to determine where the money went and why.

The second problem clearly evident in its absence, is that the debt arose between the borrower and the lender, which is to say the party who took the money (or the benefit) and the party who paid the money (the source of funding on the loan). Everyone else is a intermediary with no right to claim otherwise. This fact alone accounts for the corruption of the state and county title registries, which, contrary to the assertions in the white paper, have operated perfectly regardless of volume, thus negating the use of a national registry that is being attempted to paper over the property rights of individuals, and local taxing authorities.

The third problem is the assumption that it is difficult for the investors to fire the services and replace them with others who will perform in the interests of the real parties, thus reducing the huge unnecessary deflation in home values caused by forcing them into foreclosure. Investors can easily set up their own operations (announcement from livinglies coming shortly) wherein they can either purchase clear title from the homeowners effected or enter into meaningful modifications and settlements without the use of the existing servicers who are marching to the tune played by banks. It is well known and well established that most homeowners would give up many claims and defense if they settle the issue with their home. For those who have left they could be induced to either return or be paid a small fee for clearing title.

The solution is evading the regulatory authorities because they are presuming the mantra from Wall Street is true. There is nothing to support the mantra other than the persistent drumbeat of the same lies.

The central thesis of the white paper is true, however. Negative equity will destroy the housing market and the economy will be dragged down with it. Converting properties to rentals assumes the parties renting the properties own them. Not even Fannie Mae of Freddie have any clear right to claim title to these “REO” properties. But its equally true that a trusted portal could provide a method of settling, mediating and modifying the mortgages such that the recovery would be multiples of what are current being reserved for investors. And it is equally true and well-established that most homeowners will accept principal due and payments that exceed the current value of the collateral which is artificially deflated by the incessant pressure of ever-expanding supply inventory.

The ONLY obstacle to resolution is our commitment to using realism and practicality instead of ideology and an unswerving loyalty to those who trashed the system.

NOTABLE QUOTES:

Federal Reserve Jan 4 2011 housing-white-paper-20120104

The ongoing problems in the U.S. housing market continue to impede the economic recovery. House prices have fallen an average of about 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses and an associated ratcheting down of aggregate consumption. At the same time, an unprecedented number of households have lost, or are on the verge of losing, their homes. The extraordinary problems plaguing the housing market reflect in part the effect of weak demand due to high unemployment and heightened uncertainty. But the problems also reflect three key forces originating from within the housing market itself: a persistent excess supply of vacant homes on the market, many of which stem from foreclosures; a marked and potentially long-term downshift in the supply of mortgage credit; and the costs that an often unwieldy and inefficient foreclosure process imposes on homeowners, lenders, and communities.

Finally, foreclosures inflict economic damage beyond the personal suffering and dislocation that accompany them.1    In particular, foreclosures can be a costly and inefficient way to resolve the inability of households to meet their mortgage payment obligations because they can result in “deadweight losses,” or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods.2    These deadweight losses compound the losses that households and creditors already bear and can result in further downward pressure on house prices. Some of these foreclosures can be avoided if lenders pursue appropriate loan modifications aggressively and if servicers are provided greater incentives to pursue alternatives to foreclosure. And in cases where modifications cannot create a credible and sustainable resolution to a delinquent mortgage, more-expedient exits from homeownership, such as deeds-in-lieu of foreclosure or short sales, can help reduce transaction costs and minimize negative effects on communities.

Housing Market Conditions
House Prices and Implications for Household Wealth
House prices for the nation as a whole (figure 1) declined sharply from 2007 to 2009 and remain about 33 percent below their early 2006 peak, according to data from CoreLogic. For the United States as a whole, declines on this scale are unprecedented since the Great Depression. In the aggregate, more than $7 trillion in home equity (the difference between aggregate home values and mortgage debt owed by homeowners)–more than half of the aggregate home equity that existed in early 2006–has been lost. Further, the ratio of home equity to disposable personal income has declined to 55 percent (figure 2), far below levels seen since this data series began in 1950.4

This substantial blow to household wealth has significantly weakened household spending and consumer confidence. Middle-income households, as a group, have been particularly hard hit because home equity is a larger share of their wealth in the aggregate than it is for low-income households (who are less likely to be homeowners) or upper-income households (who own other forms of wealth such as financial assets and businesses). According to data from the Federal Reserve’s Survey of Consumer Finances, the decline in average home equity for middle-income homeowners from 2007 through 2009 was about 66 percent of the average income in 2007 for these homeowners. In contrast, the decline in average home equity for the highest-income homeowners was only about 36 percent of average income for these homeowners.5
For many homeowners, the steep drop in house prices was more than enough to push their mortgages underwater–that is, to reduce the values of their homes below their mortgage balances (a situation also referred to as negative equity). This situation is widespread among borrowers who purchased homes in the years leading up to the house price peak, as well as those who extracted equity through cash-out refinancing. Currently, about 12 million homeowners are underwater on their mortgages (figure 3)–more than one out of five homes with a mortgage.6    In states experiencing the largest overall house price declines–such as Nevada, Arizona, and Florida–roughly half of all mortgage borrowers are underwater on their loans.

Negative equity is a problem because it constrains a homeowner’s ability to remedy financial difficulties. When house prices were rising, borrowers facing payment difficulties could avoid default by selling their homes or refinancing into new mortgages. However, when house prices started falling and net equity started turning negative, many borrowers lost the ability to refinance their mortgages or sell their homes. Nonprime mortgages were most sensitive to house price declines, as many of these mortgages required little or no down payment and hence provided a limited buffer against falling house prices. But as house price declines deepened, even many prime borrowers who had made sizable down payments fell underwater, limiting their ability to absorb financial shocks such as job loss or reduced income.7

Loan Modifications and the HAMP Program
Loan modifications help homeowners stay in their homes, avoiding the personal and economic costs associated with foreclosures. Modifying an existing mortgage–by extending the term, reducing the interest rate, or reducing principal–can be a mechanism for distributing some of a homeowner’s loss (for example, from falling house prices or reduced income) to lenders, guarantors, investors, and, in some cases, taxpayers. Nonetheless, because foreclosures are so
costly, some loan modifications can benefit all parties concerned, even if the borrower is making reduced payments.

Negative equity is a problem, above and beyond affordability issues, because it constrains the ability of borrowers to refinance their mortgages or sell their homes if they do not have the means or willingness to bring potentially substantial personal funds to the transaction. An inability to refinance, as discussed previously, blocks underwater borrowers from being able to take advantage of the large decline in interest rates over the past years. An inability to sell could force underwater borrowers into default if their mortgage payments become unsustainable, and may hinder movement to pursue opportunities in other cities.

Mortgage Servicing: Improving Accountability and Aligning Incentives
Mortgage servicers interact directly with borrowers and play an important role in the resolution of delinquent loans. They are the gatekeepers to loan modifications and other foreclosure alternatives and thus play a central role in how transactions are resolved, how losses are ultimately allocated, and whether deadweight losses are incurred.
Thus far in the foreclosure crisis, the mortgage servicing industry has demonstrated that it had not prepared for large numbers of delinquent loans. They lacked the systems and staffing needed to modify loans, engaged in unsound practices, and significantly failed to comply with regulations. One reason is that servicers had developed systems designed to efficiently process large numbers of routine payments from performing loans. Servicers did not build systems, however, that would prove sufficient to handle large numbers of delinquent borrowers, work that requires servicers to conduct labor-intensive, non-routine activities. As these systems became more strained, servicers exhibited severe backlogs and internal control failures, and, in some cases, violated consumers’ rights. A 2010 interagency investigation of the foreclosure processes at servicers, collectively accounting for more than two-thirds of the nation’s servicing activity, uncovered critical weaknesses at all institutions examined, resulting in unsafe and unsound practices and violations of federal and state laws.40    Treasury has conducted compliance reviews since the inception of HAMP, and, beginning in June 2011, it released servicer compliance reports on major HAMP servicers. These reports have shown significant failures to comply with the requirements of the MHA program.41    In several cases, Treasury has withheld MHA incentive payments until better compliance is demonstrated.

These practices have persisted for many reasons, but we focus here on four factors that, if addressed, might contribute to a more functional servicing system in the future. First, data are not readily available for investors, regulators, homeowners, or others to assess a servicer’s performance. Second, even despite this limitation, if investors or regulators were able to determine that a servicer is performing poorly, transferring loans to another servicer is difficult. Third, the traditional servicing compensation structure can result in servicers having an incentive to prioritize foreclosures over loan modifications.42    Fourth, the existing systems for registering liens are not as centralized or as efficient as they could be.

A third potential area for improvement in mortgage servicing is in the structure of compensation. Servicers usually earn income through three sources: “float” income earned on cash held temporarily before being remitted to others, such as borrowers’ payments toward taxes and hazard insurance; ancillary fees such as late charges; and an annual servicing fee that is built into homeowners’ monthly payments. For prime fixed-rate mortgages, the servicing fee is usually 25 basis points a year; for subprime or adjustable-rate mortgages, the fee is somewhat higher. From an accounting and risk-management perspective, the expected present value of this future income stream is treated as an asset by the servicer and accounted for accordingly.
The value of the servicing fee is important because it is expected to cover a variety of costs that are irregular and widely varying. On a performing loan, costs to servicers are small–especially for large servicers with highly automated systems. For these loans, 25 basis points and other revenue exceed the cost incurred. But for nonperforming loans, the costs associated with collections, advancing principal and interest to investors, loss mitigation, foreclosure, and the maintenance and disposition of REO properties might be substantial and unpredictable and might easily exceed the servicing fee.

A final potential area for improvement in mortgage servicing would involve creating an online registry of liens. Among other problems, the current system for lien registration in many jurisdictions is antiquated, largely manual, and not reliably available in cross-jurisdictional form. Jurisdictions do not record liens in a consistent manner, and moreover, not all lien holders are required to register their liens. This lack of organization has made it difficult for regulators and policymakers to assess and address the issues raised by junior lien holders when a senior mortgage is being considered for modification. Requiring all holders of loans backed by residential real estate to register with a national lien registry would mitigate this information gap and would allow regulators, policymakers, and market participants to construct a more comprehensive picture of housing debt.